Public accounts committee chair says tax official's use of powers to track down journalist had 'shocked her to the bones'

MPs have criticised Britain's leading tax official after HM Revenue & Customs used powers meant to catch terrorists to hunt down an employee who exposed a secret multimillion-pound "sweetheart" deal with Goldman Sachs.

Lin Homer, the chief executive of HMRC, had told the public accounts committee that phone records had been obtained using the Regulation of Investigatory Powers Act (Ripa) to unearth information about Osita Mba, an in-house lawyer.

Margaret Hodge, the chair of the committee, said that HMRC's use of the powers, ostensibly to track down whether Mba had been talking to the Guardian's then investigations editor, David Leigh, had "shocked her to her bones".

The MP told Homer she was particularly surprised "that you made a request under Ripa, which is there to deal with terrorism". She asked for assurances that HMRC would "never again use these powers on a whistleblower".

However, Homer declined to offer Hodge the desired reassurance, responding: "You know that we cannot offer carte blanche assurances for evermore that we won't use these … I have other duties of care to parliament and other individuals."

Using the Public Interest Disclosure Act, Mba wrote in confidence to the National Audit Office (NAO) and two parliamentary committees in 2011 saying that the then head of tax, Dave Hartnett, had "let off" Goldman Sachs from paying at least £10m in interest.

When HMRC discovered Mba's intervention, his belongings, emails, internet search records and phone calls and the phone records of his then wife, Claudia, were examined by investigators.

At the committee meeting, Hodge also asked whether it was appropriate to pass Mba's wife's address, mobile number and office number to HMRC staff to investigate. Homer, who joined HMRC shortly after the investigation into Mba, acknowledged that mistakes had been made. She said that lessons had been learnt and accepted that he was acting in good faith. Steve Barclay, the MP for Cambridge North, said that it was surprising that HMRC felt able to use its investigative powers on someone who was helping an official parliamentary inquiry. "This was as high-profile a case as you could get."

Homer replied saying her department is taking further steps to help individuals with genuine concerns.

On 11 October 2011, the Guardian published a story under the headline "Goldman Sachs let off paying £10m interest on failed tax avoidance scheme", written by Leigh. Publication prompted members of the revenue's criminal investigative unit to take action.

One named internal criminal investigator sent an email on 19 October to a colleague saying that the revenue had begun "a review of the suspect's (Mba's) H drive (the hard drive used within HMRC) and email traffic and internet usage", but inquiries had revealed nothing. He then proposed a "further interrogation of computer material" and an "itemised billing check".

Using the Regulation of Investigatory Powers Act 2000 HMRC can see websites viewed by taxpayers, where a mobile phone call was made or received, and the date and time of emails, texts and phone calls.

Mba, who trained as a barrister in Nigeria and completed his master's degree at Oxford, worked in the personal tax litigation team that dealt with the Goldman Sachs tax issue. He told the NAO and two parliamentary committees that the bank's settlement had been agreed with a handshake by Dave Hartnett, the permanent secretary for tax at HMRC.

Mba believed the deal could be illegal, and told auditors he was making the disclosure under whistleblowing legislation. Hartnett admitted that his organisation had made a mistake by approving the deal. In June 2012, Mba filed a claim under the Public Interest Disclosure Act in the central London employment tribunal which was settled last year. He has now left the organisation.