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Can you please mention few details about your DAC environment? After that I can suggest something.
a) which version of OBIEE you are using?
b) DAC client and server resided in one machine or not?
c)It is a window or unix environment?
If you are getting any error please mention the same.
Thank you guys for quick reply. The issue is solved now. As I mentioned earlier Test email was going out without any problem. I just thought of restarting the server and guess what its working fine now. So I am assuming we need to restart the DAC server once we setup the email notification configuration.