the erasure, and "no one had thought to move (the tapes) out of a default situation", James Warren, a former director of counter-terrorism for Canadian Security Intelligence Agency (CSIS) told the panel on Wednesday.
But Warren also insisted that the tapes contained no vital evidence because they had been reviewed before being erased.
The development was the latest in a string of shocking lapses in security at Toronto's Pearson airport and in the follow-up by Canadian investigators. This week marks the final round of public hearings on the bombing.
Air India flight 182 en route from Canada to India exploded in mid-air off the coast of Ireland in 1985, killing all 329 people on board. Most were Canadian citizens of Indian descent.
A second bomb, which was planted in a suitcase on another Air India flight from Canada, exploded at Tokyo's Narita airport, killing two baggage handlers.
Prime Minister Stephen Harper ordered the public inquiry into security and investigation lapses in May 2006, under pressure from Air India victims' families following a contentious acquittal of two suspects in the bombing.
The inquiry headed by former Supreme Court judge John Major has already heard about what intelligence officials may have known about a conspiracy to bomb an Air India flight.
This week the inquiry is looking at one of the most contentious questions: Why did CSIS bug the telephone of the main suspect and then erase the tapes?
In the months following the bombing, CSIS - then Canada's newly created domestic spy agency - erased 150 wiretap tapes of phone conversations by Sikh extremist Talwinder Singh Parmar, later identified as the prime suspect in the bombing.
Former officials of the Royal Canadian Mounted Police (RCMP), Canada's national police force, testified on Monday that they thought they had an understanding with CSIS to keep the tapes, which were considered crucial evidence.
Warren insisted there was no deliberate attempt to suppress any evidence or avoid sharing it with RCMP investigators.
In the absence of a specific order by senior personnel to preserve the tapes, junior CSIS officers simply followed the "default" procedure of wiping clear tapes after a certain period, Warren told the inquiry.
Warren conceded that this procedure should have been amended in the case of Air India tapes, but denied there were any ulterior motives for erasing the tapes.
Although 54 tapes were preserved and some written summaries survived, the loss of the originals meant the RCMP and prosecutors could not review the full conversations for their later criminal investigations.
The bombings were thought to be the work of Canada-based Sikh extremists. Only one person, Inderjit Singh Reyat, the man who made the bomb, was ever convicted and is serving a five-year sentence for manslaughter.
But Canadian authorities have been unable to get their hands on the main suspects.
Vancouver businessman Ripudaman Singh Malik and Kamloops sawmill worker Ajaib Singh Bagri were acquitted by a British Columbia Supreme Court judge in 2005 of eight charges. Talwinder Singh Parmar, thought to be the mastermind of the bombing, was killed in 1992 in a mysterious shootout with Indian police.