How does Koestler’s story depict the radical results of an authority figure with limitless power and totally ignorance of his people?

Arthur Koestler's Darkness at Noon was written to reflect his own combined horror at Nazism and disillusionment with communism as it had evolved in Russia under Stalin. 
The figure of Commissar Nicholas Rubashov makes for a compelling protagonist as he is not at all a rebel, but himself an authoritarian figure. He has acted in the past out of a combination of desire for ideological purity and the goal common to all authoritarian systems: making authority and suppression of dissent, and even suppression of any independent thinking or questioning, a goal in itself.
The main point is not so much that figures of authority, from the lowest to the highest positions in the chain of command, are ignorant of their victim's innocence. It is rather that power has become a goal in itself, and brutality and torture a way to ensure that people are cowed and terrified. Rubashov has become so complicit with the system in which he lives that he betrays his friends and lover, something he recalls as he meets his own downfall. Ivanov is punished also for letting bonds of friendship and understanding affect his treatment of Rubashov.
Thus we can argue that Number 1 and Gletkin are not so much unwittingly ignorant as indifferent to other people. Eventually, the truth of the accusation matters less than the way torture, degradation, and execution of random subordinates solidifies Number 1's authority. This sense of ideological control, in which truth itself becomes subject to authority, is exemplified in the passage: 

The horror which No. 1 emanated, above all consisted in the possibility that he was in the right, and that all those whom he killed had to admit, even with the bullet in the back of their necks, that he conceivably might be in the right.