The country's de facto leader, Aung San Suu Kyi, made ending Myanmar's multiple civil wars, which have lasted for 70 years, a priority when her National League for Democracy won landslide elections in 2015, ending five decades of military rule. The sound of automatic gunfire filled the air as ambulances picked up the wounded.
"Nineteen [people] were killed in fighting", the military source said, adding that two-dozen had been injured.
L Soe Htan Tu, a spokesman for the government in Muse, confirmed that at least 20 people had been taken to Muse's main hospital with serious injuries.
He called the operation "terrorism". He told dpa earlier that just 17 people were killed in the attack.
Those fleeing violence have sheltered in tents and even churches in Kachin, which is mainly Christian, as rights groups accuse the military of blocking aid.
A TNLA spokesman told Agence France-Presse that the group attacked because of the military's offensive against an aligned armed group in Kachin State, further north in the country.
The KIA, one of Myanmar's most powerful ethnic minority armed groups, based in the mountains bordering China and India, has regularly clashed with the Myanmar army since a ceasefire broke down in 2011.
Myanmar's military frequently clashes with several groups, which say they are fighting for greater autonomy for ethnic minorities in the area, through which much of Myanmar's foreign trade flows.