Stephane wroteHi,
For the leds:
1) yes it is normal, it does the same on my system.
2) red led flashing or off: it means that there is not enough voltage for the PI, it happens when you are using a weak cable.
I have measured the current and it is less than 1A for the PI3 and a Digi SPDIF card. With my 7" TFT screen it goes up to 1.2A peak. And I had the same problem with normal USB cables, I had to build my own.
For your DAC, I have no idea. Try to connect with SSH to the PI (user: root, password: rune) and see with alsamixer if the outputs are not muted.
Thanks Stephane,
I am not using micro usb, I am connecting PSU from GPUI anyway I checked the voltage and it shows 4.85 V. I will re connect with more thick cables. lets see