This research project report presents analysis of embedding of storage and timing covert channels in TCP/IP. This project comprises of development and implementation of storage based covert channel (covert ts) and theoretical foundations of Information Theory to detect covert timing channels.In this project covert system is developed to exploit timestamp field of TCP header for covert channel. Covert timing channels use packet inter-arrival times to encode covert messages. This report investigates the channel capacity of Internet-based timing channels and proposes a method to detect the covert timing channels based on the use of channel capacity.