While trying to send email, following error occurs in Horde/Squirrelmail :
535 Incorrect authentication data
This usually occurs when the option “Allow mail account authentication using the password of the domain owner’s account” in WHM -> Server Configuration -> Tweak Settings is enabled.
Webmail logs you in but attempts to use the cPanel account password via SMTP. Hence. the problem.
Disable the option and check.
If this does not fix the issue then try running /scripts/upcp