When you open shut off no.1 (the ball valve with the blue handle) do you open it fast or slow? This is not a trick question. You should always open and close water valves slowly to avoid any water hammer...EXCEPT for opening this one. When you open it, you should snap it open to allow the water to hit the seat hard enuough to seal it. If you open it slowly there is a chance that it will not seal. You might have to try it a couple of times. The rubber has been dry all winter and the plastics might need a little coaxing to start movement.
I don't mean to sound like a PITA, but.....In your picture you don't show shut off no.2. Is there a shut off no.2? You need a shut off no.2 to isolate the assembly for testing. As far as I can see, this is a non-approved backflow assembly. This has been modified, as is not how the manufacturer sold it.