At the end, we figured out that it was due to the report uses sub-reports and all sub-reports require to be saved with . as the server name in the Crystal Reports file. So that when it runs from the web application, it would then work successfully. In addition, we found this is the only solution and it will fail even when replacing the . with localhost.
This is an unusual solution that we normally do not see. So I record this here for future references.
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