Hi @Karthik Naidu ,
Welcome to Microsoft Q&A Platform. Thank you for posting query here.
I tried Copy activity using Source dataset(Binary) with compression type as "gzip(.gz)" and Sink dataset(Binary) with compression type as "none" and got similar issue when I pointed to an .txt file in source.
From your error message also, it seems you are point to "file_name.txt" file using source dataset which has compression type as "gzip(.gz)", hence ending up with issue. ".txt" files will not have any compression types. You can select "none" as compression type in source dataset and run copy activity for same file and check results.
Please let us know if it works or any further queries. Thank you.