Hi Sumaira
Please check if the Product is definitely being added at the Item Level.
Keep in mind that in general SAP GUI Transactions are not always supported for the later releases of SAP CRM. So the WEB UI is the proper testing ground.
Confirm that the BADI is correctly coded.
Failing all that, test using a Priority value in the Response Profile...just to verify that it's definitely not the issue.
Regards
Arden