.. can i write a software .. that can detect pulses in a condition if more than 1 telephone set is dialing as there are maximum 8 lines.?

As there aren't 8 hardware interrupts on your micro: no, not without additional hardware. What you would need is some sort of line-seeker to detect which phone is off-hook ready for dialing and then connect it to a free interrupt line to start counting pulses. That would limit the amount of lines you can use, but it would be feasible quite easily. If you use a 8052 compatible with PCA modules, you can increase the number of hardware interrupts to a useable amount.

.. can controller be used to sent call progress tones ..

Using the PWM capabilities of the device: yes. But if you should be able to do all the things you want on all phones at the same time, I think you will be in trouble. In any case will it be necessary to add additional peripheral hardware.

.. how can controller sent different tones if more than one set is in operation .. can controller be programmed to .. Time Division Multilexing etc..?

See above. TDM is quite off-topic in relation to what you want / need.

From my perspective, you are aiming too far. It has already been said before: take it one step at a time, then see how much resources are left to expand your system and/or increase the capabilities, but start off with just 2 phones. As far as I can see you haven't built anything yet. The only way to get to your goal is hands-on experience with the complete hardware, not just the software running in a simulator. Up to the drawing board !