I set up a new splunk instance on my local machine, created a dummy alert but it did not send me any notification email even though it was triggered.
any idea what might cause this issue in the alert_actions.conf file?
at first check if your Splunk Search Head reach the SMTP server on port you enabled (e.g. 465) using telnet from SH (telnet IP_SMTP_Server 465).
Then did you configured SMTP Server (as @arjunpkishore5 said) in [Setting -- Server Settings -- eMail Settings]?
If the above checks are Ok, check the dimension of your message and attachment, if one of them exceeds the eMail limits, it will be blocked.