Tcp – What happens when TCP Sequence Number is incorrect

Found the solution to my own question with the help and hint from @Guy Harris. The kernel was dropping packets due to that the buffer tcpdump uses got overfull when capturing whole TCP packets.

From tcpdump man page:

packets dropped by kernel (this is the number of packets that were dropped, due to a lack of buffer space, by the packet capture mechanism in the OS on which tcpdump is running, if the OS reports that information to applications; if not, it will be reported as 0).

The kernel puts captured packets in a fixed-size capture buffer. If tcpdump doesn't empty that buffer quickly enough, the kernel will begin overwriting old packets in the buffer and correspondingly incrementing the dropped counter. The value of that counter is what you see as "dropped by kernel".

The capture buffer can be re sized by giving tcpdump the -B option to specify new buffer size in KiB