After creating AAC version, the AAC file isn't under the MP3 file

Yes, that is exactly how it is supposed to work. The newly converted file does get added to your Music library but *does not* get added to the playlist. So, if you want to see it, you need to look in Music.

The playlist will continue to have the original song in it. If you want to replace it by the newly converted track, you can do so manually.

OK?

Click on the column with "Name" at the top. Then your library will re-sort and the versions of the song will be together.

Newly converted files get added (with their tag data and artwork) to the music library. They do not replace the original in any individual playlist; that needs to be done manually. Is that what you mean?

moonknight, When a new file is added to the library, whether by conversion or any other means, it will display in the library like any other file.

If your library is sorted by Date Added, the newest one will be right at the top.

If your library is sorted by Name, it will be next to other songs having the same name, which would include the file from which you converted it.

If by any chance you are referring to the song file itself, as opposed to its iTunes library entry, you will find it in your iTunes Music folder, in a subfolder by Artist containing a subfolder by Album. iTunes puts the converted file there, no matter where the original is located. Is that what you are referring to?