if we create sub domain then google will treat this as a new website. In case of sandbox, will google sandbox entire website or just the sub domain.
It depends on the industry you're in... http://www.seroundtable.com/archives/002822.html Brett Tabke of WebmasterWorld.com asked Matt Cutts about sandboxing, and Cutts basically said there is no sandbox, but for some industries the algorithm may affect some sites in a way that could be perceived as being sandboxed. But it's a guessing game as to which industries he was refering to... porn? online gambling? who knows.
There is no sandbox any longer. Also it's a known fact that new sites/pages get some boost in Google for a short time. I also saw that subdomains sometimes get the "credit" of the main website if somehow related to its niche.