virtualbox.org

Base: Win 7
VM : Win7
============================
VM Version: 4.2.16.r86992
VM Extension Pack Version: 4.2.16 ( I have already installed this extension pack using "VBoxWindowsAdditions-amd64")

When I go to intial VM Manager and do check for upgrade, it finds extension pack needs tobe updated, and then downloads. After that, When I agree for the license, then I get the following error message...

Failed to install the Extension Pack C:/Users/e404726/.VirtualBox/Oracle_VM_VirtualBox_Extension_Pack-4.2.16.vbox-extpack.
The installer failed with exit code 1: VBoxExtPackHelperApp.exe: error: Failed to rename the extension pack directory: VERR_ACCESS_DENIED
rcExit=1.
Result Code: E_FAIL (0x80004005)
Component: ExtPackManager
Interface: IExtPackManager {3295e6ce-b051-47b2-9514-2c588bfe7554}

Not sure why VM Manager couldn't detect already installed VM extension.

You're confusing GuestAdditions and Extpack. The former is installed in the guest while the later in the host.
Your error says pretty much what happens : Virtualbox tried to do a file operation on the ext pack directory but got an denied by the OS to do so.

What is the output of the followng command - must be run within the installation dir of Virtualbox :