Even "IF" you were to do all water tight fittings and wiring method the Tank wiring point will NEVER be water tight. The wiring access covers made by mfg Will leak "in" water in event of a water line break, seen many times. Inspector wants something that cannot be provided within the listed appliance limitations, he might need to be trained again on even the code definitions.
OP's thread title refers to water heater near the electrical panel, If this is the case the only requirement is that the working space and dedicated space, and egress requirements are adhered to. Best practice would be to keep it as far away from panel as possible while keeping to the minimum requirement already stated.