Good question, I would have to say that it depends on the situation, if it hurts someone, I say tell the truth. Also try putting yourself in the other person's situation and see what you would do: tell the truth or lie.

The naked truth is always better but it bitters to many.

No sir, this statement is not useful for each and every moments / situations. Yes I know truth is always good, but sometimes truth is very harmful for life also. For example in Mahabharat the Dharmaraj Yujhistir also told a lie i.e. Narew a gungare swasthama hattah for saving Pandavs sena. I am telling another short story also regarding naked truth and undressed lie.
Ek Rishi the jangal mein. Unke bahut sary sishya the. Rishi humesha satya aur dharma ki gyaan dete rehete the shishyon ko. Rishi ki amrit bani sun sun ke shishyon ne bhi satya ka maarg pakad liye the. Ek din aisa hua ki ek shikari ne dhanush mein teer lagate hue ek hiran ke peeche peeche bhagta hua aashram mein aa pahuncha. Heeran aashram mein chup gaya tha. Shikari ne pucha he Rishi maharaj kya ek heeran yaha aaya hai? Rishi ne kahan nehin bastch heeran to ush disha mein bhag raha tha. Tum ush disha mein jaao. Aur shikari chalagaya. Tabhi shishyon ne kaha he gurudev aapne to humko satya ka path padhate hein, aur khud jh ...more

It depends upon which context you are talking of. It is true in social discourse and personal relationships. But while taking bath one has to uncover one's naked truth.

I fully endorse the statement, friend

That is the reason i am always well dressed ... !!