ZOHO Mail bounce

Hi,

we are new to ZOHO and testing Zoho Mail.
MX records were set:

Priority	Mail Server
10	mx.zohomail.com
20	mx2.zohomail.com

We have created some mailboxes of our domain.
However our emails to that recipients in our domain get bounced:

Invalid Address, ERROR_CODE :550, ERROR_CODE :5.1.1 The email account that you tried to reach does not exist. Please try
            5.1.1 double-checking the recipient's email address for typos or
            5.1.1 unnecessary spaces. Learn more at
            5.1.1 http://support.google.com/mail/bin/answer.py?answer=6596 mr7si25907755pbb.281

Any help would be appreciated...

PS: We setup a Google-Apps before testing ZOHO. However the MX records were changed and Google apps was cancelled. Could that still be the problem?

*Update*: Please see attachment