Circuit works on battery but not on power supply. Any ideas why?
You have noise current pulses from D2 which creates large dI/dt * wire inductance (voltage noise spikes) and this can cause glitches to nearby cables and supply voltage.

If adding a Low ESR cap to PS out does not help, a large CM choke between Vdc out and in will help greatly to isolate glitch current noise. (100uH CM choke recommended or large ferrite clamshell around DC cable source.