Fresh revelations today in the widening Westland Helicopters controversy put Prime Minister Margaret Thatcher at odds with the Britain's biggest defense contractor and with Italy, a European partner in NATO.

Before a packed House of Commons, opposition Labor Party leader Neil Kinnock demanded that Thatcher answer the growing number of questions raised by the controversy. He accused her government of manipulation and implied it was now engaged in a cover-up.

"I know a stink when I smell one," Kinnock said.

Thatcher rose to her own defense, insisting that "the government has conducted itself properly and responsibly throughout." Allegations to the contrary, she said, were "absurd."

At the end of the seven-hour debate, Thatcher seemed to have headed off demands for the resignation of her trade secretary, Leon Brittan. Many of those demands, however, came from members of her own Conservative Party, where Brittan, although close to Thatcher, has never been a popular figure.

The government also resisted an opposition motion for a full-scale parliamentary inquiry into the Westland saga. The motion was defeated, 370 to 217, in the House of Commons, where Thatcher's party has a 144-seat majority.

But Thatcher appeared to make little headway in her efforts to bring the crisis to an end. As more details of the issue are released daily in formerly secret documents, her government appears in ever more disarray.

The most sensational release of the day was a letter sent to Thatcher last week by Sir Austin Pearce, chairman of British Aerospace, the country's largest defense contractor. Pearce contradicted crucial elements of testimony to Parliament by Brittan.

British Aerospace and four other companies, three of them European, have formed a consortium to bid for a share of the bankrupt Westland Helicopters. That bid is in competition with an American offer by the Sikorsky helicopters division of United Technologies Corp.

Although Thatcher has argued her government has no preference between the two bids, her defense secretary, Michael Heseltine, resigned last week, charging that she had manipulated government policy to favor Sikorsky. Heseltine has implied that factors included an anti-European attitude and an allegedly irrational commitment to private enterprise in a crucial defense area.

Heseltine charged repeated interventions, including a request by Trade Secretary Brittan that British Aerospace withdraw from the consortium. He also accused Brittan of charging that the company was acting against the national interest.

On Monday, Brittan denied making such a statement, although he acknowledged meeting last week with British Aerospace chief executive Sir Raymond Lygo. The letter to Thatcher from company chairman Pearce, released today, contradicted Brittan.

During his conversation with Lygo, Pearce wrote, the trade secretary had made both the national-interest charge and the withdrawal request. At the same time, Pearce indicated, Brittan had said he was concerned "about the effect on Anglo-American business that our actions might be having." The British Aerospace bid against an American company, it was suggested, might be interpreted as anti-American.

British Aerospace currently is bidding for large American defense contracts with the help of the British government and is involved with collaborative European projects such as the Airbus. Brittan, Pearce wrote, threatened that the company might lose such contracts if its involvement in the Westland matter continued. "The connection is worrying, to say the least," Pearce said. "Whatever the words used were meant to convey, the message was perfectly clear."

Both Thatcher and Brittan today supported Brittan's original version of the meeting, saying that Lygo had misremembered and misinterpreted the trade secretary's remarks.

In his own statement during today's debate, Heseltine said Thatcher's Foreign Office last week had "instructed the British ambassador in Rome to ask the Italian government to send no more messages of support for the European consortium."

Italy's Agusta aircraft company, which is 97 percent government-owned, is one of the other partners in the consortium bid. In a public statement last week, Italian Prime Minister Bettino Craxi said he favored the consortium bid for Westland, in the interests of European defense collaboration efforts.

A Foreign Office spokesman acknowledged that a cable had been sent to the Rome embassy on Jan. 8, "following a public statement by Craxi on Jan. 7 in which he endorsed" the consortium bid. The cable, the spokesman said, "instructed the ambassador in Rome to emphasize to the Italian prime minister's office that Westland is a private company and it is for the board of Westland and the shareholders to decide on the relative merits of the proposals made by Sikorsky and Fiat [a minority partner in the Sikorsky bid] and by the European consortium."