Do you mean I can show the INR value of bitcoins earned, at the time of earning, as my cost ? That way, those who sell immediately after earning, will never have a taxation on their earning. I dont think Income Tax authority is ever going to accept this logic.
Nope. That is incorrect. You anyway have to pay income tax on the INR value of bitcoins you earn.
If you sell them after a while and make some profit, you have to pay tax for the
second time. That is when the acquisition cost comes in. If you sell immediately after earning, you just pay tax on the income (first time) and nothing by way of capital gains.