When I ran the addGrouping trasaction with the extended field I got the following response.
Parser DWLTransaction failed. The format of the message is not correct or an application error occurred.
The reason being I had already done an entity addition which is having the attribute XMyExtId .Even if entries for grouping extension goes to DWLrequest_extesnion.dtd & repsonse ,during the parsing it still looks at the trcrmrequest_extsnsion.dtd(I dont know the reason for that) whcih is having the entry XMyExtId for my addition I did earlier.
Just rename the attribute XMyExtId you used for extension or else you can utilize the old deceleration for XMyExtId by commenting out the current one.