Of course amaterasu works under water. Why wouldn't it? It burns ANYTHING. That was stressed very much when it was first used. It's non-extinguishability and its ability to burn just about anything, unlike normal fire. Supernatural black flames and dat.
Also, erm... this is being discussed like all Itachi could do is Tsukuyomi, Amaterasu, Susanoo (which I believe would block out the water but then would have trouble against thousand sharks attack). Itachi also had the sealing sword, which would require little to no chakra to use. And for those saying Kisame would find a strategy to beat Itachi with, have you forgotten how clever Itachi is?? Plus in this condition he has no illness and would actually be trying to kill so he wouldn't do that silly thing where he made Amaterasu barely touch Sasuke. It wouldn't be easy, but I do believe Itachi has this in the bag.