User creation On Premise "Attempting to create a user with a domain logon that does not exist"

This can happen in some scenarios of a valid Username as below:

1. Trust is not established between the CRM Server domain and the User Domain
2. The User is not present is not active in Active Directory

3. Duplicate entry of User is present with same user Name in the Active Directory (Can happen in scenarios where Post deactivation, same Username is created again)

To resolve the issue, 

•  Correct the User Name in the ACtive Directory by deleting the entry corresponding to the inactive username.

If it is not feasible to make the correction in the Active Directory, 

• Temporarily turn the AutoGroupManagementOff to 1 in the HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\MSCRM in CRM FrontEnd
  (This is by default 0 - And during any User creation in CRM they are automatically added to the Reporting Group and User Group)
• Create User in CRM
• Add the User manually to the ReportingGroup and the UserGroup of the corresponding CRM AD Group.
  
  For details refer: 

For details refer: https://community.dynamics.com/crm/f/microsoft-dynamics-crm-forum/167494/issue-in-creating-a-user-in-crm-2011/411072