Function in top condition not evaluated

We have the following function definition:

    syntax Bool ::= KItem "#in" Set                                                        [function, functional]
    rule X #in SetItem(A) => X ==K A                                                       [simplification]
    rule X #in SetItem(A) SetItem(B) S:Set => X #in SetItem(A) orBool X #in (SetItem(B) S) [simplification]
    rule X #in .Set => false                                                               [simplification]

And the following term in top-level condition:

#And
  #Not ( {
    notBool ( ( b"095ea7b3" ++ #buf ( 32 , ?ACCT1 ) ) ++ #buf ( 32 , ?SYMB_INT ) #in SetItem ( b"2387e975" )
    SetItem ( b"c2d56e53" )
    SetItem ( b"f02ce809" ) )
  #Equals
    true
  } )

Why it is not evaluated?

No source file, test, or entry point is named. Reproduce the supplied top-level condition and inspect the evaluation or simplification path for #in and its function rules. Done means establishing and clearly explaining why the condition is not evaluated, including whether the behavior is a defect or a limitation.