When an alternating linear electric field is applied to an aqueous suspension of micron-size polystyrene particles, hydrodynamic instabilities are seen at a frequency range between 2 and 200 kHz. The formation of elongated bands of particles oriented at certain angles relative to the direction of the applied electric field and circulation of particles within the bands are observed. We examine the phase lag between the induced dipole moments of the particles and the effects of this on the interactions between neighboring particles. Because the phase lag causes neighboring particles to exert torques upon one another, thereby causing spinning of double layers, we propose a phenomenological model in which there is a symmetry breaking between the direction of the polarization of the particles and the direction of the applied electric field. Based on this modified dipole-dipole interaction, and together with hydrodynamic interactions, we are able to simulate the formation of the tilted bands of particles. The sense of circulation of particles within a band also agrees with our experimental observations.