Sendmail saying "user unknown" after setting up MX

Hi Friends,

I set up the sendmail in my perosnal home lab. I am using mutt to send the email in between the machines. Everything is working fine if i send email like <username>@<hostname>. Now i set up the MX record for my domain "home.com" and then i was trying to send the email to like root@home.com, but in this case as soon as i press "Y" to send the email in mutt; i get this error

Error sending message, child exited 67 (User unknown.)

Even in the sendmail logs it shows user known. I know that my sendmail was not configured to accept message from the domain home.com, so i added the home.com to /etc/mail/local-host-names file but still this error remains. It is weird and i assume i should get a delivery failure with something saying like "relaying rejected"

So can anyone please help me figuring out what is going on here ?>

see for any relay server or DNS where you have to make an entry for the ip address from where u are sending mail. now it is not able to identify who is sending mail.

i too got this error ... but sending mail was successful
i have code like following
subject="my log"
mutt -s $subject xyz@abc.com < /dev/null

i got rid this error after removing white space in subject variable ...