Amar
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I have come across this bug again on both Windows 10 64-bit and Android, on 1.2.3.
To test this, I created a superflat, peaceful world and a stick 140 blocks high, then a small platform 30 x 30 on top of that, which I stood at the edge of. I then put the difficulty on easy and set the time to night, then waited for 5 minutes.
What should have happened is monsters spawn on the platform that I made, and no monsters spawn beneath, as the platform was higher than 128 blocks above the ground.
However, after I set the time to day (to stop monsters spawning) I went back to ground level and found many monsters, showing that monsters are spawning lower than 128 blocks below the player.
Confirmed on Windows 10 64-bit on 1.2.3, and Android.