Hello, and welcome. I am a licensed attorney and happy to assis I will assume, unless you tell me otherwise, you are the landlord, not the tenant.
It sounds like the inspector is going by what's on record, not what has obviously been built. That's legal and the only way they can do things. So, you're stuck in the situation. The good news is there is a potential way out. First, it's important to keep the lines of communication between you and the B&S inspector open. As long as they feel you are doing your part to cooperate, they will give you time, work with you, and afford you every consideration possible. That said, you do have some responsibilities here, and it does not necessarily include shutting down the downstairs bath that was built without a permit. that is especially important if the unit is rented to a tenant. The inspector will provide you with room for a couple of things. First, if you request it, he will give you time to hire an inspector to show that the bathroom is up to code. If it is, you will be allowed to submit permits that can be approved and the whole thing can go away. If not up to code, you can submit plans to bring it up to code and take the steps to make the corrections. If you do that, your bathroom will still remain intact and you will probably avoid all fines and penalties.
I hope this information helps. If you need additional information or clarification, just let me know and I'll be happy to continue assisting. If I have addressed your issue and/or pointed you in a positive direction, please let me know that, as well. Also, please remember to leave a positive rating when prompted, as that is the only way attorneys on this site are credited for the help we provide.