Hi Waqar,

You can generate DTMF signals with a uC which supports PWM. An example of what is required is in an Atmel apnote, http://www.atmel.com/dyn/resou...OC1982.PDF. I'm sure there are a lot of other apnotes and examples out there. DTMF generation would be harder to do with an AT89C52 which doesn't have PWM hardware.

I wouldn't attempt DTMF decoding with the uC. Get a regular DTMF decoder chip for that.

Once you can send and receive the DTMF tones, then you can start on the next details of your project.

Dennis