I must admit that I usually use Gentoo, so I can't guarantee that my advices work exactly the same way for Ubuntu...
2. there are no entries in /etc/hosts.allow and hosts.deny
You can usually ignore these anyway because most modern network services offer more secure access controls.
3. I even checked in /var/log/messages which displays as connection refused
Are you sure there's no other hint which contains useful information?
Guide me properly to disable the firewall
I don't know what kind of firewall Ubuntu uses by default, but I'm pretty sure it's based on Netfilter/iptables. To disable it simply type in the console
This sets the default policy of the INPUT chain to "ACCEPT" which allows all inbound connections and it flushes all rules to delete rules which could explicitly block inbound conntections. WARNING!!! This is only meant for testing purposes! It doesn't only allow SSH traffic but instead it allows access from all sources with all protocols to your host! It's just the easiest way to find out if the problem is really the firefall!
That said, a typical firefall configuration usually doesn't lead to this error message! Instead the terminal would probably "hang" because packets are silently dropped. A "connection refused" error is more likely to indicate that the SSH server isn't even running. Could you check this?