I read "Operation Drumbeat" , if I recall correctly without opening book...
Hardegan was in shallow waters off the southern coast of Long Island when the incident with the Norwegian merchant vessel happened. He mentioned that they were so close to shore, that they could smell the evergreen trees (Fire Island?).
The Norwegian vessel heading east from NYC, caught U-123 off guard and it did not have enough time to properly (safely) dive without hitting bottom. I think Hardegan was uncertain of the clearance above the conning tower if he dove. On the surface, u-boote is faster and more maneuverable than it's submerged. Besides, U-123 would have possibly been steam rolled if Hardegan decided to dive at that shallow depth.
In the book, there was no mention of the "Atlas Echolot" on board U-123 being damaged.
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