Hi @AmitLoh-Powerap,
Thanks for your update.
For SSO enabled on-premise data source, when choose using the gateway, would it be possible for you to enter the
"
Oauth2
"
Under authentication type?
I tried with my testing account and specify the authentication type as 'Oauth2', the connection created successfully under Microsoft Flow.Sorry to say that currently I don't have available on-premise SharePoint data source to perform a test, I can't confirm whether the connection would work. If convenient, please take a try to type the oauth2 in Authentication type, then create the SharePoint connection, see if this would make it work.
For PowerApps, currently SharePoint on-premise only supports the Windows authentication (A dropdown with 'Windows' choice only).
Regards