Checking if image exist in my local resources

You need to convert the relative file path into a physical file path in order for File.Exists to work correctly.

You will want to use Server.MapPath to verify the existence of the file:

if(File.Exists(Server.MapPath("/images/items/"+item.Name+".jpg")))

Also, when you use Server.MapPath, you should usually specify the leading slash so that the request is relative to the web application's directory.

If you don't provide the leading slash, then the path will be generated relative to the current page that is being processed and if this page is in a subdirectory, you will not get to your images folder.