Ask for a code citation and who his boss is.

If he is saying the leads from the lights cannot be concealed he is correct.

All concealed wiring must be an NEC approved method.

The typical method is to use less stringent low voltage wiring methods that are left UNconcealed on the bottom of the cabinets.

Note to self: Future product idea - cabinets, with built-in lights, manufactured specifically to be hardwired.

There are a great number of undercabinet lights that are manufactured to be hardwired. (they don't come with any cords or plugs attached) Your inspector is correct if you are cutting off plugs to hardwire the lights. If you are using lisenced electricians, they should know how to deal with the inspector. It is part of their job. You have to know what you are talking about code wise to try and convince the inspector, and if that doesn't work you have to go to their boss and or appeal their decision to the appeals board. The appeals board process should take no longer than two weeks according to code rules. There again good electricians should be aware of this. I do many kitchens where 14/2 is pulled through the sheetrock right below the bottom of the cabinet and run along the bottom of the cabinet and into fixtures that are made for hardwiring. There are some tricks of the trade used to keep these installations legal. There are less than knowledgeable inspectors and electricians and I don't know which may be your problem. Someone is in need of some learning.
Good Luck
Groundrod

The inspector is correct about the under cabinet light not being plug in. All receptacles in the counter area are to be small apppliance circuits. Lights are not permitted on these circuits. Therefore no plug in lights under the cabinets

I'm not sure what you are trying to do with the IN cabinet lighting. You say hardwired inside walls. I can tell you that ALL splices must be in boxes that are accessible. You can not bury a splice inside a wall.

These are the rules. They are basic kitchen code rules. Your electrician should know these.

"The inspector is correct about the under cabinet light not being plug in. All receptacles in the counter area are to be small apppliance circuits."

Half correct.

The lights may not be on the small appliance branch circuits serving the counters.
The typical dodge is to put the receptacles inside the cabinets, then run any cords to plug in exposed on the bottom of the cabinet, and then into the cabinet and plug them in there.
The receptacles must NOT be on the counter (small appliance) branch circuits.
A separate circuit is required (though it can be shared with other loads like lighting).

So if I, joe-home-owner, go to Wally world and buy an under counter fluorescent light fixture with a 120V plug on it, and I plug it into the over-the-counter outlet box, I have violated NEC?

yes you have

Well, in all the fancy magazines, it is exactly as the OP wants it, with nothing messing up the backsplash. I agree, ask for the EXACT NEC citation, "chapter and verse", which supposedly prohibits this.

Secondly, pester contractor for actual photos of his past installs... better late than never. ;')

I do many kitchens where 14/2 is pulled through the sheetrock right below the bottom of the cabinet and run along the bottom of the cabinet and into fixtures that are made for hardwiring. There are some tricks of the trade used to keep these installations legal.

This suggests some kind of slick/sleek bushing/clamp for passing through the sheetrock... do tell, do tell. ;')

I would have your electrician request a consult with the inspector. Layout all the pieces, see what the inspector advises. If that doesn't work get another electrician, one that has had experience in your area with highend kitchen lighting.