I am new to ubuntu. Hence please forgive me if the question is too simple.

I have a ubuntu server setup using amazon ec2 instance. I need to connect my desktop (which is also a ubuntu machine) to the ubuntu server using SSH.

I have installed open-ssh in ubuntu server. I need all systems of my network to connect the ubuntu server using SSH (no need to connect through pem or pub keys).

Hence opened SSH port 22 for my static IP in security groups (AWS).

My SSHD-CONFIG file is:

# Package generated configuration file
# See the sshd_config(5) manpage for details

# What ports, IPs and protocols we listen for
Port 22
# Use these options to restrict which interfaces/protocols sshd will bind to
#ListenAddress ::
#ListenAddress 0.0.0.0
Protocol 2
# HostKeys for protocol version 2
HostKey /etc/ssh/ssh_host_rsa_key
HostKey /etc/ssh/ssh_host_dsa_key
HostKey /etc/ssh/ssh_host_ecdsa_key
#Privilege Separation is turned on for security
UsePrivilegeSeparation yes

# Lifetime and size of ephemeral version 1 server key
KeyRegenerationInterval 3600
ServerKeyBits 768

# Logging
SyslogFacility AUTH
LogLevel INFO

# Authentication:
LoginGraceTime 120
PermitRootLogin yes
StrictModes yes

RSAAuthentication yes
PubkeyAuthentication yes
#AuthorizedKeysFile %h/.ssh/authorized_keys

# Don't read the user's ~/.rhosts and ~/.shosts files
IgnoreRhosts yes
# For this to work you will also need host keys in /etc/ssh_known_hosts
RhostsRSAAuthentication no
# similar for protocol version 2
HostbasedAuthentication no
# Uncomment if you don't trust ~/.ssh/known_hosts for RhostsRSAAuthentication
#IgnoreUserKnownHosts yes

# To enable empty passwords, change to yes (NOT RECOMMENDED)
PermitEmptyPasswords no

# Change to yes to enable challenge-response passwords (beware issues with
# some PAM modules and threads)
ChallengeResponseAuthentication no

# Change to no to disable tunnelled clear text passwords
#PasswordAuthentication yes

# Kerberos options
#KerberosAuthentication no
#KerberosGetAFSToken no
#KerberosOrLocalPasswd yes
#KerberosTicketCleanup yes

# GSSAPI options
#GSSAPIAuthentication no
#GSSAPICleanupCredentials yes

X11Forwarding yes
X11DisplayOffset 10
PrintMotd no
PrintLastLog yes
TCPKeepAlive yes
#UseLogin no

#MaxStartups 10:30:60
#Banner /etc/issue.net

# Allow client to pass locale environment variables
AcceptEnv LANG LC_*

Subsystem sftp /usr/lib/openssh/sftp-server

# Set this to 'yes' to enable PAM authentication, account processing,
# and session processing. If this is enabled, PAM authentication will
# be allowed through the ChallengeResponseAuthentication and
# PasswordAuthentication.  Depending on your PAM configuration,
# PAM authentication via ChallengeResponseAuthentication may bypass
# the setting of "PermitRootLogin without-password".
# If you just want the PAM account and session checks to run without
# PAM authentication, then enable this but set PasswordAuthentication
# and ChallengeResponseAuthentication to 'no'.
UsePAM yes

Through webmin (Command shell), I have created a new user named 'senthil' and added this new user to 'sudo' group.

sudo adduser -y senthil
sudo adduser senthil sudo

I tried to login using this new user 'senthil' in 'webmin'. I was able to login successfully.

When I tried to connect ubuntu server from my terminal through SSH,

ssh senthil@SERVER_IP

It asked me to enter password. After the password entry, it displayed:

Permission denied, please try again.

On some research I realized that, I need to monitor my server's auth log for this. I got the following error in my auth log (/var/log/auth.log)

Jul  2 09:38:07 ip-192-xx-xx-xxx sshd[3037]: pam_unix(sshd:auth): authentication failure; logname= uid=0 euid=0 tty=ssh ruser= rhost=MY_CLIENT_IP  user=senthil
Jul  2 09:38:09 ip-192-xx-xx-xxx sshd[3037]: Failed password for senthil from MY_CLIENT_IP port 39116 ssh2

When I tried to debug using:

ssh -v senthil@SERVER_IP


    OpenSSH_5.9p1 Debian-5ubuntu1, OpenSSL 1.0.1 14 Mar 2012
debug1: Reading configuration data /etc/ssh/ssh_config
debug1: /etc/ssh/ssh_config line 19: Applying options for *
debug1: Connecting to SERVER_IP [SERVER_IP] port 22.
debug1: Connection established.
debug1: identity file {MY-WORKSPACE}/.ssh/id_rsa type 1
debug1: Checking blacklist file /usr/share/ssh/blacklist.RSA-2048
debug1: Checking blacklist file /etc/ssh/blacklist.RSA-2048
debug1: identity file {MY-WORKSPACE}/.ssh/id_rsa-cert type -1
debug1: identity file {MY-WORKSPACE}/.ssh/id_dsa type -1
debug1: identity file {MY-WORKSPACE}/.ssh/id_dsa-cert type -1
debug1: identity file {MY-WORKSPACE}/.ssh/id_ecdsa type -1
debug1: identity file {MY-WORKSPACE}/.ssh/id_ecdsa-cert type -1
debug1: Remote protocol version 2.0, remote software version OpenSSH_5.8p1 Debian-7ubuntu1
debug1: match: OpenSSH_5.8p1 Debian-7ubuntu1 pat OpenSSH*
debug1: Enabling compatibility mode for protocol 2.0
debug1: Local version string SSH-2.0-OpenSSH_5.9p1 Debian-5ubuntu1
debug1: SSH2_MSG_KEXINIT sent
debug1: SSH2_MSG_KEXINIT received
debug1: kex: server->client aes128-ctr hmac-md5 none
debug1: kex: client->server aes128-ctr hmac-md5 none
debug1: sending SSH2_MSG_KEX_ECDH_INIT
debug1: expecting SSH2_MSG_KEX_ECDH_REPLY
debug1: Server host key: ECDSA {SERVER_HOST_KEY}
debug1: Host 'SERVER_IP' is known and matches the ECDSA host key.
debug1: Found key in {MY-WORKSPACE}/.ssh/known_hosts:1
debug1: ssh_ecdsa_verify: signature correct
debug1: SSH2_MSG_NEWKEYS sent
debug1: expecting SSH2_MSG_NEWKEYS
debug1: SSH2_MSG_NEWKEYS received
debug1: Roaming not allowed by server
debug1: SSH2_MSG_SERVICE_REQUEST sent
debug1: SSH2_MSG_SERVICE_ACCEPT received
debug1: Authentications that can continue: password
debug1: Next authentication method: password
senthil@SERVER_IP's password: 
debug1: Authentications that can continue: password
Permission denied, please try again.
senthil@SERVER_IP's password: 

For password, I have entered the same value which I normally use for 'ubuntu' user.

Can anyone please guide me where the issue is and suggest some solution for this issue?