By Wafa Amr

JERUSALEM, Sept 23 (Reuters) - The family of a Palestinian shot dead after his car ploughed into pedestrians in Jerusalem challenged on Tuesday Israeli police allegations he had carried out a deliberate attack.

More than a dozen soldiers, on a late-night excursion to Jerusalem ahead of the Jewish New Year next week, were injured in Monday's incident. No Palestinian group has made a credible claim of responsibility.

Police called it a "terrorist" attack, the third of its kind using vehicles against Israelis in the city since July and involving Palestinians from East Jerusalem and its environs who live on Israeli-annexed land and have wide freedom of movement.

Police identified the driver of the black BMW as Qassem Mughrabi, 19, of Jabal Mukhabar, a village in the occupied West Bank that is effectively a suburb of East Jerusalem.

Mahmoud Mughrabi, 49, his father, said his son did not have a driving licence and apparently lost control of the car.

"My son was murdered, they killed him. He did not carry out a terrorist attack. This was a car accident," Mughrabi, owner of a trucking business, said at his home where police had barred him from setting up a traditional Muslim mourning tent.

Mughrabi said he wished the soldiers a speedy recovery, a remark not typical of parents of Palestinian militants killed by Israeli forces.

Shmuel Ben-Ruby, a police spokesman, said the incident was still being treated as an intentional attack and information suggested disappointment over a failed romance might have been the motive.

Ben-Ruby said investigators found that Mughrabi, who had no prior police record, "wanted to marry his cousin but when she refused he apparently decided to carry out the attack".

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The incident underscored the dilemma Israel faces in Jerusalem, where its claim to all of the city as the undivided capital of the Jewish state also entails granting Palestinian residents freedom of movement that raises security risks.

Police ordered the driver's father, uncle and three brothers to report for questioning.

Qassem Mughrabi's sister Rasha, 24, said his cousin and other women recently turned down his proposals of marriage. She said he had told her he was going out with friends and would soon return home.

Relatives said he took the keys to his brother's car, a powerful German-built limousine.

Ben-Ruby said Mughrabi's vehicle struck a traffic island and then careened onto a sidewalk, driving for several metres (yards) before striking the soldiers and then a wall.

Mughrabi was shot dead at the scene by a soldier, a policeman and a civilian, the spokesman said.

Defence Minister Ehud Barak, commenting on the incident, said "immediate legal action" should be taken to clear the way for the razing of Palestinian assailants' homes as a deterrent to "other potential terrorists".

The families of three other Palestinians involved in attacks in Jerusalem this year have won court orders to prevent demolition of their homes. Three Israelis were killed in one of these attacks, in July, in which a Palestinian rammed a bulldozer into traffic. (Editing by Louise Ireland/Jeffrey Heller)

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