I have an n tier application with presentation layer, business layer, DAL and business objects layer. Separating the objects and the operation written on the objects break the object oriented concept of encapsulation.
No. Consider what "encapsulation" means: the implementation details of a class are concealed behind the interface (messages, or methods) of the class.
In fact, you can derive the n-tier architecture directly from OO principles and Parnas's Law: a module should encapsulate what's likely to change. The presentation tier encapsulates the details of creating a "visible" interface; the middle tier the model of the business itself; and the back end the details of accessing the persistent data store.