Why is he angry at me? What did I do?

Well you could have been more forthright with him. Instead of saying you were busy, you should have been honest and said that you like him he's a nice guy and you would like to be friends and that is it. Yes you would have hurt his feelings but that's far better than fudging the truth and offending him. You're not a bad person or you wouldn't be asking this question. I think you can patch things up with him by apologizing and letting him know that you respect his wishes.