Error: An expression of non-boolean type specified in a context where a condition is expected, near ')'.

In your WHERE clause you have

and (convert(varchar(8), dateadd(second, SUM(DATEDIFF(SECOND, '00:00', LatenessN)), 0),  108))

This is not a condition - you are not comparing it to anything. You need to do one of the following:

1. Finish off the clause by comparing the converted date to something e.g. using BETWEEN or < or >

OR

2. Remove that part of the WHERE clause altogether

---------------------------

[Edit]For the benefit of the curious or anyone experiencing a similar issue...
The OP appears to have changed the query to

SELECT convert(varchar(8), dateadd(second, SUM(DATEDIFF(SECOND, '00:00', LatenessN)), 0),  108) as Short from Daily where
EmpCodeC='003' and ClockDateD between ( '01/Jan/2015 12:00:00 AM') and ('31/Jan/2015 12:00:00 AM')
AND (convert(varchar(8), dateadd(second, SUM(DATEDIFF(SECOND, '00:00', LatenessN)), 0),  108) <='02:00:00')

Which will result in the error

Quote:

An aggregate may not appear in the WHERE clause unless it is in a subquery contained in a HAVING clause or a select list, and the column being aggregated is an outer reference.

The problem is obviously that SUM which to be honest I hadn't spotted.
One solution is to use a HAVING clause:

SELECT convert(varchar(8), dateadd(second, SUM(DATEDIFF(SECOND, '00:00', LatenessN)), 0),  108) as Short from Daily where
EmpCodeC='003' and ClockDateD between ( '01/Jan/2015 12:00:00 AM') and ('31/Jan/2015 12:00:00 AM')
HAVING (convert(varchar(8), dateadd(second, SUM(DATEDIFF(SECOND, '00:00', LatenessN)), 0),  108) <='02:00:00')

or you can use a CTE and use the column alias in the AND clause

Select * from
(
SELECT convert(varchar(8), dateadd(second, SUM(DATEDIFF(SECOND, '00:00', LatenessN)), 0),  108) as Short from Daily where
EmpCodeC='003' and ClockDateD between ( '01/Jan/2015 12:00:00 AM') and ('31/Jan/2015 12:00:00 AM')
) temp
Where Short <='02:00:00'

[2nd suggestion posted at How to use Alias in where cause in sql server[^] by @RAHUL(10217975) - bug corrected by me]