Time magazine correspondent David Halevy testified today that he still cannot bring himself to believe that former Israeli defense minister Ariel Sharon encouraged the massacre of hundreds of Palestinians at two Beirut refugee camps in September 1982.

"I am an Israeli," Halevy said. "I'm an officer of the IDF Israel Defense Forces . I fought with the IDF. I don't want to believe it, even at this moment."

But the reporter added that he believes that "Sharon knew there would be a massacre, there would be atrocities, and he turned his back."

Sharon, scowling at Halevy, shook his head in disagreement as his lawyer interrogated the correspondent about his sources for the article at issue in Sharon's $50 million libel suit against Time.

Halevy testified that he had relied on information from two Israeli generals, an "intelligence person" and another government official in tracking down leads that Israel's Kahan Commission, which was set up to investigate the massacres, had received unpublished notes of meetings between Sharon and Lebanese Christian Phalangist leaders the day before Sharon allowed the Phalangist militiamen into the refugee camps.

Halevy said his principal concern had been to pin down accusations that Amin Gemayel, now the president of Lebanon, and his late father Pierre, who then led the Phalangist party, were "directly involved" in the atrocities. The reporter suggested in his testimony that the reason Israel's government has refused to release information about the meetings is officials' concern that it would damage relations between Israel and Lebanon.

The Kahan Commission had concluded that Sharon and other top-ranking Israeli officials bore "indirect" responsibility for the massacres because they had failed to foresee the clear possibility that they might occur. But the commission absolved Sharon and all other Israelis from suspicions that they had any role in the planning or execution of the killings.

The massacres began Sept. 16, 1982, the day after Israeli soldiers moved into West Beirut and surrounded the camps. Two days before, the militiamen's leader, Bashir Gemayel, had been assassinated in a bomb explosion.

The Time article went further than the commission and reported that Sharon, during a condolence call on the Gemayel family Sept. 15, had discussed the need to take revenge. Sharon emphatically denied this during seven days of testimony.

Halevy testified today that one of the generals who had been a source for the article referred to minutes of the meeting and described Sharon as telling the Gemayels that he believed that Bashir had been the victim of a "Syrian-Palestinian conspiracy." Halevy said his source gave him a "clear indication" that Sharon also used words to indicate that "this Syrian-Palestinian conspiracy should not be left without a retaliation, reprisal, reaction, some kind of an answer."

The notes of the conversation and of an earlier meeting that day between Sharon and Phalangist military commanders were discovered long after the Kahan Commission had begun its investigation, Halevy testified.

The correspondent said his sources told him that Gen. Rafael Eitan, then Israel's army chief of staff, had initiated the search for the documents because Eitan felt that Sharon, in his testimony before the commission, had primarily blamed Eitan for ordering the Phalangists into the camps.

Sharon's lead attorney, Milton S. Gould, noted that Time had earlier expressed concern about Halevy's use of sources in dispatches he sent to New York. Gould also recalled that Halevy was once put on a year's probation for a story on then-Israeli Prime Minister Menachem Begin's health, which drew a complaint from Begin and an apology from Time.

Halevy invoked New York's law protecting the confidentiality of a reporter's sources in refusing to name the sources of his information. Gould repeatedly referred to the sources as Halevy's "informers" or "informants" despite repeated admonitions from the judge not to do so.