A major inquiry into the use of undercover police officers to infiltrate protest groups has been thrown into chaos after the Guardian revealed damaging allegations that police chiefs had authorised undercover police officers to give false evidence in court.

The government's official police inspectorate dramatically cancelled the planned publication of a report by Bernard Hogan-Howe, the new Metropolitan police commissioner, into the use of police spies.

The announcement came just hours after the Guardian revealed it has obtained documents showing an undercover officer had concealed his identity from a court when he was prosecuted alongside a group of protesters for occupying a government office. Jim Boyling gave a false name and occupation when he was arrested and maintained the fiction even when giving evidence under oath.

Boyling and his police handlers never revealed to the activists on trial with him that he was an undercover officer.

The Hogan-Howe report had been expected to rule out tough independent oversight of undercover police officers, despite widespread concern about the ethics of deploying the police spies.

A number of the police agents had been found to be having sexual relationships with activists, including Mark Kennedy, whose seven-year deployment as an environmental activist prompted the review by her Majesty's Inspectorate of Constabulary (HMIC).

However, less than twelve hours before the Hogan-Howe report was due to be unveiled, HMIC announced the report would be postponed.

"In light of the allegations in the media today, we are delaying the launch of our report," the watchdog said. "This is so we can consider the relevance of this information to the recommendations for improvement in undercover policing tactics that we are making in our review."

The HMIC statement, released shortly before BBC Newsnight reported on the case, added: "We will be writing to the Guardian and Newsnight to invite them to provide any additional information they may have on top of that published today."

Sir Ken Macdonald, the former director of public prosecutions, said on the programme that senior police officers had made a "monumental misjudgment" and "crossed the line". He predicted a flurry of appeals.

Three court of appeal judges have already overturned the convictions of 20 environmental protesters, ruling that crucial evidence recorded by Kennedy was withheld from their original trial. Another trial, of protesters accused of plotting to break into a power station, also had to be abandoned.

Boyling used the name Jim Sutton between 1995 and 2000 in the campaign Reclaim the Streets, which organised nonviolent protests against cars, such as blocking roads and holding street parties.

Boyling and the protesters were represented by the same law firm, Bindmans, as they held sensitive discussions to decide how they were going to defend themselves in court.

The activists allege Boyling and his superiors broke their fundamental right to hold legally protected consultations with their lawyers and illicitly obtained details of the private discussions.

The Guardian has discovered that police chiefs authorised undercover officers to hide their real identities from courts when they were prosecuted for offences arising out of their deployment.

Peter Black, another police officer who worked with Boyling in the same covert unit penetrating political campaigns, said Boyling's case was not unique. He said from time to time prosecutions were allowed to go ahead as this helped to build up their credibility. Being prosecuted was "part of their cover".

Hogan-Howe has been leading an inquiry into the legality and accountability of planting undercover police officers into political groups after revelations about Mark Kennedy, the police spy who spent seven years infiltrating the environmental movement.

Police have been accused of wasting huge sums of public money by spying on protesters pursuing legitimate campaigns. Boyling, a serving Metropolitan police officer, married an activist he met while undercover in the environmental protest movement, and had children with her.

It is alleged that he maintained the charade of being a committed activist when he was prosecuted in Horseferry Road magistrates court in London in 1997 for disorderly behaviour following Reclaim the Streets activists' occupation of the office of the chairman of London Transport, which ran the tube and rail system.

Official records show that when he was arrested and taken to Charing Cross police station he told police he was "Pete James Sutton", and that his occupation was "cleaner".

Under the fictitious identity, he instructed a solicitor from Bindmans to represent him, according to the law firm.

When Boyling went into the witness box, he swore under oath that he was Sutton, and gave evidence under questioning from the defence and prosecution barristers, according to a legal note of the hearing.

All but one of the activists were acquitted. John Jordan, who was convicted of assaulting a police officer and given a conditional discharge for a year, has launched an appeal to have his conviction quashed. His lawyer, Mike Schwarz from Bindmans, said: "This case raises the most fundamental constitutional issues about the limits of acceptable policing … At first sight, it seems that the police have wildly overstepped all recognised boundaries."

The Met initially declined to comment on the case. However late on Wednesday night it released a statement, saying it had been "reviewing issues regarding the deployment of undercover officers and the policy and practices in place at the time of the events described in the Guardian".

"The [Met] acknowledges that these are serious matters and is continuing to review the situation, and will take account of any additional information that becomes available. We are confident that the current legislative and regulatory framework governing the deployment of undercover officers ensures that all such deployments conducted now are lawful and appropriately managed."