Try tweaking it a little bit, like this:

update test3;
set qty = (Select table1.amount;
From table1 ;
where test3.date=table1.date;
and test3.sno=table1.sno;
and table1.code=[3501001])
>Dear Experts
>
>Following codes work fine
>
>

>select test3
>scan
>    scatter memvar
>    select table1
>    locate for date=m.date and sno=m.sno and code=[3501001]
>    if found()
>        amt=amount
>        select test3
>        replace qty with amt
>    endif
>endscan
>

>
>
>But these codes do work. Please help me to find what is wrong.
>
>

>update test3;
>    set qty=table1.amount;
>    where test3.date=table1.date;
>    and test3.sno=table1.sno;
>    and table1.code=[3501001]
>