After lot of troubleshooting and breaking my head for a week, I did not find any solution for this issue and hence raised a case with Microsoft.
So the finding is, the above issue seems to be with SSRS 2014 by design and this is confirmed by Microsoft engineer after testing this on their lab.
In SSRS 2016, this issue is not there !!
Workaround/Resolution for the SSRS 2014-
- Backup rsreportserver.config file for SSRS 2014 server ( path for rsreportserver.config: C:\Program Files\Microsoft SQL Server\MSRS12.MSSQLSERVER\Reporting Services\ReportServer
- Search UrlRoot and ReportServerUrl in this file and specify Web Service https URL there like below:
- Save the file. Close the file.
- Restart SSRS service to take it effect.
- It works!!