Scotland Yard should apologise directly to the families caught up in the Forest Gate anti-terror raid who were put through a "terrifying experience", the police watchdog said today.
At least two of the 11 occupants of the raided houses were struck, one of them over the head, by officers who employed "very aggressive" tactics, the Independent Police Complaints Commission said.
The IPCC said the families were "victims of failed intelligence" and criticised Scotland Yard for its handling of the operation, during which one innocent man was shot and injured by police.
The police watchdog has spent several months investigating claims of assault, unlawful arrest and detention by the occupants of the two raided houses.
Both properties, numbers 46 and 48 in Lansdown Road, Forest Gate, east London, were searched by police officers hunting for a suspected chemical bomb.
The IPCC has already conducted an inquiry into the shooting of one of the two brothers arrested in the raid.
It ruled that the shooting was an accident, the result of contact on a narrow staircase between the man, Mohammed Abdul Kahar, and the police officer.
Mr Kahar, a Muslim, later claimed he was kicked in the face by a police officer, slapped and dragged down a stairway by his foot.
His family also complained that their house was completely pulled apart by the police during the raid.
Mr Kahar and his brother, Abul Koyair, were arrested during the raid and held for several days before being released without charge after officers found nothing in the house.
Today's IPCC report comes amid increasing tension between the police and the Muslim community.
Last week, one of the men arrested during the Birmingham anti-terror raids said Muslims in Britain were now living in a "police state".
The police watchdog revealed that more than 150 complaints were made by 11 members of the two houses raided during the operation.
It said a number of these were upheld, relating to their treatment in custody. One officer has received a written warning over an allegation of neglect.
Each of the residents complained about "aggressive behaviour" by armed police during the raid, ranging from assault and the pointing of weapons to swearing.
The IPCC revealed that three allegations of assault - on each of the two brothers arrested, and their neighbour who was hit over the head - were criminally investigated.
The Crown Prosecution Service, however, decided the evidence did not justify the prosecution of any officer.
IPCC Commissioner Deborah Glass said: "It is quite right that the level of force used will have raised the most serious concern. I know that some people will feel very strongly that individual officers should be disciplined.
"However, after much thought, I have concluded that the level of force has to be judged in the light of the officers' beliefs that they were facing an extreme lethal threat not just to themselves but to the public and to the occupants of the houses themselves.
"None of this should minimise the deep and understandable sense of grievance felt by all those affected on what must have been a terrifying experience.
"I also believe the police could and should have changed their response much sooner once in control of the situation. Despite the small number of complaints upheld, there are very important lessons to be learned from this case."
Ms Glass said that when innocent people were injured or "publicly branded as terrorists" the police should make "an equally high-profile public apology".
"I am not aware that they apologised to the families," Ms Glass said.
"These families were the victims of failed intelligence. I am not saying officers should be disciplined as a result of that but I think that is grounds for an apology."
Ms Glass, who spent several months investigating the allegations, concluded that the police were right to launch the raid.
She said that, although the intelligence was later found to be wrong, the police had "no choice" but to act on it.
The police tactics were "forceful and aggressive", but this was "inevitable given the threat the police genuinely believed they faced".
However, she added that the police "could and should" have changed their tactics once the houses and their occupants were under control.
Only two of the 11 occupants at the properties were arrested, yet all were taken to a police station.
The IPCC criticised Scotland Yard and said this was both "inappropriate and insensitive".
The report also criticised the detention of one of the arrested brothers, Mr Koyair, who was held by police for several days.
The watchdog said it should have been considered earlier whether this was necessary, and left the way open for Mr Koyair to make a formal complaint.
Ms Glass said the intelligence which led to the operation related to the existence of a "highly dangerous explosive device that could be set off remotely" and that this was believed to be in one of the two houses.
She refused to comment on whether the intelligence had come from a single source.
However, she called on Scotland Yard to publicly explain the process of evaluating intelligence to improve public confidence in anti-terror raids.
She admitted that the IPCC had only been given access to the intelligence on the basis that it did not discuss anything about it.
"It was clearly very important for us in investigating this (to have access to the intelligence)," Ms Glass said. "I simply cannot tell you any more. That is the basis on which it was supplied to us."