The incident is to be investigated at a public inquiry to be announced tomorrow by Defence Secretary Bob Ainsworth, which will also examine evidence of one of the worst atrocities ever carried out by the British Army.
It is claimed that hours after the picture, left, was taken, the four men were transferred to a UK-run detention camp where they were badly beaten and where 20 other civilians were murdered by British soldiers.
Lawyers for the men say the photograph, held by the Army since May 2004 but only disclosed this year, supports evidence of the routine abuse of Iraqi prisoners.
The covering of a prisoner's face and rear handcuffing on the ground is a breach of Common Article 3 of the Geneva Conventions which prohibits the humiliating and degrading treatment of detainees.
When this is done to support interrogations, as in this case, it also contravenes Article 31: prohibition of physical and moral coercion. It is also a breach of Article 3 of the European Convention on Human Rights, as well as the Army's own rules on the hooding of prisoners.
The International Committee of the Red Cross raised concerns about similar breaches in February 2004 when it warned the UK and US governments of these practices. The new evidence will add to calls for a full and proper public inquiry into 33 further abuse cases involving allegations against the British Army in Iraq between 2003 and 2008.
Last night, Lord David Ramsbotham, a former commander of the British Field Army and a former chief inspector of prisons, said he believed the picture showed inhuman and degrading treatment. He told The Independent: "There can be few people who have not been sickened, and saddened, by the images of Iraqi citizens being subjected to what is well described as inhuman and degrading treatment, at the hands of certain British soldiers.
"Sickened because this is not the kind of treatment associated with a nation that calls itself civilised; saddened because it besmirches the reputation of the British Army, so carefully preserved by so many people in many different circumstances," he said.
Kevin Laue, the legal adviser to Redress, which works with victims of torture, said: "In my view, what the photograph shows could well constitute cruel, inhuman or degrading treatment ... they appear to have been blindfolded to such an extent that almost their whole face has been covered, including the nose and even the mouth, which if so would obviously make normal breathing difficult...
"The photograph raises numerous questions which would need to be asked and answered to decide if the treatment could be justified. On the face of it, it is wrong," he said.
Phil Shiner, the lawyer who pushed for a public inquiry into the alleged massacre and mutilation of 20 Iraqi civilians in the aftermath of the Battle of "Danny Boy", which involved British forces, near Basra in May 2004, said: "The MoD conceded an inquiry not simply because of late disclosure, but because much of that disclosure supported our clients' allegations.
"This evidence had gone uninvestigated by the Royal Military Police, undermined the MoD's case and showed how it had been misrepresented to the court. An inquiry is essential so that lessons can be urgently learned and, where necessary, perpetrators brought to justice in relation to this incident and the hundreds of other cases involving civilians that we now know went uninvestigated in Iraq."
Government lawyers admitted in the summer that in 2004 the Armed Forces minister had written a draft confidential letter, addressed to No 10, which referred to complaints made by the International Committee of the Red Cross in connection with the alleged ill-treatment of detainees held by the Army after the battle. It was the discovery of this correspondence which led the Government to withdraw its defence to a judicial inquiry into the alleged massacre and abuse of the Iraqis.
Lawyers for the Iraqis and the families of those who died said the case raised allegations that were among the most serious in modern British military history. Tomorrow, Mr Ainsworth will tell Parliament the name of the judge chosen to head the inquiry, referred to as Al Sweady after the lead claimant in the case.
The Government has always maintained that the victims were all killed in battle while their families' lawyers say they were innocent farmers who tried to flee the fighting.
An MoD spokesman said: "We have found no credible evidence that those detained, as a result of the attack on British troops and prolonged fire-fight at the Danny Boy checkpoint, were mistreated.
"The treatment of the detainees shown in the photograph does not amount to a breach of the Geneva Conventions, it is important to remember that our first priority at the end of such attacks is to protect our personnel from further threats.
"The events that followed will, in due course, be considered by the Al Sweady inquiry."
Geneva Conventions
*Hooding, cuffing and forced to lie in stress positions in the sun:
Common Article 3 of the Geneva Conventions prohibits the humiliating and degrading treatment of detainees.
*Article 31 of the Conventions prohibits physical and moral coercion techniques used to support interrogations.
*Article 3 of the European Conventions on Human Rights bans inhuman and degrading treatment.
The Army's own rules forbid hooding of prisoners and handcuffing their arms behind their back on the ground.
Covering the faces in this way restricts breathing, and to all intents and purposes, is the same as hooding. Its use in May 2004 contradicts the assurances given by the Armed Forces minister in 2004 and General Brims in 2006 to the Parliamentary Joint Human Rights Committee that hooding/face covering had been effectively outlawed.
*Handcuffing to the rear restricts breathing, has been known to lead to deaths in custody and renders a prisoner unable to break his fall if pushed.
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