I want to write a test script in python which should reboot the system in between the test execution on local machine... (No remote automation server is monitoring the script). How the script execution can be made continuous even after reboot? The script covers following scenario...

Create a Volume on some disk
Create a filesystem and mount the file system temporary 
Reboot the system 
Verify if filesystem is mounted 
Mount the filesystem again.
It's not about python but rather about your whole system config. In given conditions I suggest you to split your script on 2 parts. First part is doing 1..3 and storing some extra info you're required onto persistent storage other than the fs you're experimenting on. The second part is invoked on each OS os start, reads some data stored by first part and then performs checking actions 4..5. It seems to be the most obvious and simple way.
How to continue the python script execution from the point it left before reboot