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According to my knowledge this problem not only happens in windows phone but also in android and IOS. I recently installed a bare bone news app which just shows the text and images related to a news from web with no audio/video news included and any other functionalities. But to install the app it requires my phones

owner identity, music library, phone dialer, photo library and other requirements

I have no idea why this app requires my music and photo library as well as phone dialer. Why these kind of apps require these permissions? If I accepted these requirements assuming the app maker has some dark ulterior motives, what kind of security issue can arise if I installed this app.

Because its asking for music,photo library permission, Can it upload my photos,music or other documents to a remote server without my knowledge?

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Short answer: Yes.

With access to the libraries the app can upload your photos & music, if it also has the "Internet" capability. Same thing is true for other capabilities like Chat Message Access.

Therefore you should always cautious of what the app requests. Maybe check the ratings to see if the developer has a good reputation. You can also try to contact the dev to see why a certain capability is required. Often things like owner identity are required for Advertising etc.

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