Thanks to everbody who responded. I have finally managed to get it working. My application was under Digest folder. Under Digest there were images folder and when I run digest.exe from the shortcut it could not start because it could not locate the images.

Digest/digest.exe
Digest/images/digest.ico
Digest/images/digest_1.gif
Digest/images/digest_2.gif
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I have put following code in ScriptGenerator.pl and it worked (I did not need to specify where the images were). This method of creating shortcut tells windows where to "Start In" :

$installer->AddData(Shortcut => [
                                {
                Shortcut    => "DIGEST_DIGEST.EXE",
                Directory_  => "PROGRAMMENUFOLDER_DIGEST",
                Name        => "Digest|Digest",
                Component_  => "Digest_Digest.exe",
                Target      => "TOP_FEATURE",
                Arguments   => undef,
                Description => 'digest.exe',
                Hotkey      => undef,
                Icon_       => undef,
                IconIndex   => undef,
                ShowCmd     => undef,
                WkDir       => "DIGEST",
                                 },
                ],
);
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