This is happening because of the permission issue in the .htaccess file. This is an WordPress installation issue and not theme issue. Right now i have set the permalinks settings to default from the “post name” in the Settings > Permalinks in the dashboard. Now you will not see the 404 error.
See this post for more info on using permalinks http://codex.wordpress.org/Using_Permalinks .
Here is more info on resolving it http://wordpress.org/support/topic/postname-permalinks-setting-not-working-properly