Here is how this problem occurs.
Using latest version of WordPress and Jetpack.
I am using Canvas theme from Woothemes.
It was working fine on default layout.
After I switched to Custom Template page as the Frontpage the problem appeared.
Problem doesn’t occur for Admin only for readers.
https://domain/page/2 is redirected to https://domain.com/2 which leads to either 404 or an image file instead of page 2.