Update:
-AC Repair

It was indeed evaporator leak as suspected.
Lucky that the car has extended warranty and warranty company paid for the repair.
I'm really glad I didn't have to folk out $2700+ worth of repair out of my pocket.

If anybody is interested, more detail explanation regarding the remedy follow.

E70 with quad zone system has a single evaporator and 4 separate flaps for each of the zoning temperature settings.

Here is the picture of the Evaporator housing (IHKA - Integrated automatic heating aircondition system)
It has a single evaporator in the case. (diagram #5 on the picture)


IHKA with FKA (rear control) has 4 flaps that adjust temperature individually.


It was pretty obvious that the refrigerant smell from the vents were coming from the leaky evaporator since only place that can pollute interior is leaking evaporator. But interesting enough, low refrigerant was also the cause of different temperature throughout the zoning.

Initially, I figured that the zoning system not cooling the same way was due to the faulty flaps but I was wrong on that. When the AC system runs low on refrigerant, low charge causes the evaporator to cool unevenly. This was the reason why the right side of the car (both front and rear zone) was not as cool as the driver side.

Thank god for extended warranty, now hopefully no more ac problems.

Replaced parts follows:
-Evaporator
-O-rings
-Drier Desiccant (Accumulator/Receiver Drier)

Attached invoice: