So your general approach is correct but you need to override the behavior of boto. So you need to create multiple patches for it. Something like this would probably work:

"""
Mock Connection class for Bucket
"""
class MockConnection():
    def __init__(self):
        self.provider = 'AWS'

    def delete_key(self, param):
        pass

"""
Mock Connection class which is called for connecting to s3
"""
class MockS3Connection():
    def get_bucket(self, name, validate=False):
        return Bucket(MockConnection(), 'bucket')

"""
Mock Key class which also gets the bucket
"""
class MockKey():
    def __init__(self, bucket):
        self.bucket = bucket

    def set_contents_from_string(self, data, headers):
        pass

    def set_acl(self, read):
        pass    
"""
Mock the function which connects to S3
"""
def mock_connect_s3():
    return MockS3Connection()

class TestUploadResource(BaseResourceTestCase):
    """
    Test Document upload
    """
    def setUp(self):
        super(TestUploadResource, self).setUp()

    @mock.patch('boto.connect_s3', new = mock_connect_s3)
    @mock.patch("boto.s3.key.Key", MockKey)
    def test_file_is_accepted(self):
        '''
        Test case to check whether file is uploaded
        '''
        name = raw_input('Document1')+'.pdf'
        file = open(name,'rw')   # Trying to create a new file or open one

        """
        Call the upload docs command with the file which 
        we want to save
        """
        response = self.client.post('some-url')

        """
        Check whether the file is going and the response of creation
        is coming or not
        """
        self.assertEqual(201, response.status_code)

You can then add various things in your function as what would be the expected behavior. Hope this helps.

The above solution worked. Also i had to mock the save method.

@mock.patch.object(<Model>, 'save')
@mock.patch('boto.connect_s3', new=mock_connect_s3)
@mock.patch("boto.s3.key.Key", MockKey)
def test_post_file(self, save_mock):
  response = self.client.post('/api/v1/file_upload/', {
            "status": "NEW",
            "amount": "250.00",
            "bill": file_mock
        })
  self.assertTrue(save_mock.called)
  self.assertEqual(201, response.status_code)

After a lot of research, the simplest solution I have found so far is monkey patching the FileField in the setUp method or even at the top of the tests files.

Example:

from django.core.files.storage import FileSystemStorage
from myapp.models import Report

class TestUploadS3(TestCase):

    def setUp(self):
        ...
        Report.pdf_file.field.storage = FileSystemStorage()
        ...

This way the file is not uploaded to S3.