Amid increasing diplomatic tension over Israel's negotiating picture on the future of the occupied West [WORD ILLEGIBLE]and Gaza Strip, Prime Minister [WORD ILLEGIBLE]Begin yesterday denied that his government had rejected any peace plan proposed by Egypt.

Begin, apparently in response to President Carter's expression of disappointment Monday that Israel had rejected an Egyptian peace counterproposal even before it had been presented, said Egypt has submitted "demands" for Israel's withdrawal from the West Bank and Gaza but no peace proposal."

"To this day Egypt has not presented a peace plane and therefore no such plan has been rejected by Israel," Begin said in a statement issued by his office. "It is nevertheless a fact that the president of Egypt again demanded that Israel hand over" the West Bank to Jordan and the Gaza Strip to Egypt.

"It is this that was rejected," Begin said.

His statement appeared somewaht at odds with an official Israeli Cabinet communique issued Sunday that referred to Egyptian President Anwar Sadat's recent suggestion that the Gaza Strip be turned over to Egypt that the West Bank to jordan pending negotiations on border security arrangements. That communique referred to the Egyptian statement as a "proposal," not as a demand.

In its communique Sunday, the Cabinet said, "Israel unreservedly rejects these proposals of President Sadat." Instead, the Cabinet said, Israel was proposing negotiations, without pre-conditions, on its five-year, limited self-rule plan for palestinian Arabs, after which the future of the territories would be brought up for further discussion.

Cabinet officials on Sunday went at length to convey the impression that it was the "pre-conditions" attached to Sadat's proposal that caused the Israeli government to take the extraordinary step of rejecting it even before it had been transmitted to them by Egypt through diplomatic channels.

Begin's statement, which coincides with signs of increasing future contact between Egyptian and Israeli negotiators, underscored the kind of semantical trap in which Israel lately has found itself caught and which has often given Israel the image abroad of a recalcitrant bargainer.

On Sunday, Cabinet Secretary Aryeh Naor repeatedly told correspondents that Israel was prepared to negotiate any proposal offered by Sadat, includiing to the return of the West Bank and Gaza to Jordan and Egypt.

Under intensive questioning by reporters, Naor stressed that the basis for rejecting Sadat's proposal was the prior condition, which, he said, "means, if you will the West Bank to Jordan and the Gaza Strip to Egypt.

odds with an official Israeli Cabinet compending negotiations on border security accept my position, we will continue the discussions, and if you don't accept my positions, then we have nothing to talk about."

Privately, Israeli officials said that Begin's purpose in rejecting Sadat's proposal so switfly was that it had been raised before in various forums and that the repetition made it appear to be a viable peace plan "in the market."

"We wanted to be on the record before international contacts begin as saying that we don't think this is such a good idea," one Israeli official said.

The Sadat proposal is nonetheless likely to come up in the weeks ahead as peace contacts between Egypt and Israel increase.

Defense Minister Ezer Weizman has been in contact with Egyptian War Minister Mohammad Gamassi, and attempts are now being made to work out a meetin in London next month among Israeli Foreign Minister Moshe Dayan, Egyptian Foreign Minister Mohammed Ibrahim Kamel and U.S. Secretary of State Cyrus Vance.

Israeli Defense Ministry officials said Weizman has requested - through Israel's military negotiating committee, still on stand-by status in Egypt - a meeting with Gamassi in a neutral country, but the Israeli officials said Weizman has not received a reply from the Egyptians.

Weizman only this week received a go-ahead from Begin to resume his cable communications with the Egyptians, which are sent to the Israeli military committee there and relayed to the Egyptian Defense Ministry. A moratorium on such cables had been in effect during the Israeli Cabinet's prolonged debate on Israel's answers to U.S. questions about the future of the West Bank and Gaza.

Israeli officials said last night that a reply from Gamassi is expected in a few days. Weizman has urged more face-to-face negotiations with Egyptians at all levels.

Meanwhile, Vice President Mondale and Jerusalem Mayor Teddy Kollek appear headed for a diplomatic collision when Mondale arrives here Friday to commemorate Israel's 30th anniversary and to hold talks.

Kollek said yesterday he will refuse to receive Mondale if the vice president engages in the "boorish" practice of refusing to enter East Jerusalem with an official Israeli escort.

Kollek considers the rehabilitation of Old Jerusalem, in the eastern sector, to be one of his proudest achievements as mayor, and he, like most Israelis, considers Jerusalem a united city.

In the past, American state visitors to the Old City have refused Israeli escorts on the ground that it would constitute U.S. recognition of Israeli sovereignty over the section of Jerusalem captured from Jordan in the 1967 war. The United States maintains separate consulates in East and West Jersualem.

Kollek, in a telephone interview, said he had received numerous complaints from constituents about the U.S. attitude toward East Jerusalem, and had decided if Mondale insisted on continuing the practice of shunning an Israeli escort, he would refuse to attend official receptions during the vice president's visit. Kollek boycotted similar events last October when Treasury Secretary W. Michael Blumenthal visited the Old City without an official Israeli escort.

"It's all on your president's deks.Why set back good feelings? Why make a major political problem out of this? Let him (Mondale) come to city hall and we'll have a little party," the mayor said. "To refuse all of this is pretty and boorish. The footdragging already is making people mad."

Political observers pointed out that Kollek faces re-election in November, and may want to appear as hardline on the Jerusalem issue as his conservative opposition.

A spokesman for the U.S. embassy in Tel Aviv said Mondale's itinerary will not be released until today, adding, "If it is going to be a problem, it won't be one until then."

U.S. officials said refusing an Israeli escort in East Jerusalem was a practice that dates back to 1967, and they suggested that Kollek should not have expected a change during Mondale's visit.

"We're not trying to embrass anybody. We're simply carrying out an old policy," one official said.