Such cash dealing and unexplainable adjustments of  unsecured loans may lead to investigation under Income tax Act. Further non-compliance of section 269SS , 269T and 269ST is punishable under income tax Act.
 
Section 269SS:- 
Restriction on acceptance of loan or deposit in cash for rs. 20000 or more. (Penalty equal to 100% of the loan or deposit amount is leviable by the assessing officer.)
 
Section 269T:-
Restriction on repayment of loan or deposits in cash for rs. 20000 or more. (Penalty equal to 100% of the loan or deposit amount is leviable by the assessing officer.)
 
Section 269ST:-
Section 269 of the Income Tax Act states that no person/ individual must receive an amount of INR 2 lakhs or more under the following conditions:

• In total from another person/ individual in a day. However, a person may receive an amount below INR 2 Lakhs in cash in a day from an individual.
• If an individual splits the amount into various invoices of smaller values, then the individual on the receiving end cannot accept the same.
• If an individual receives cash from multiple small and different transactions but is related to a single occasion or event, the person on the receiving end can not accept cash. However, they may do so through an account payee cheque, an account payee bank draft or the use of an electronic clearing system through a bank account.
• ((Penalty equal to 100% of amount so received is leviable by the assessing officer.)

 
Section 40A(3)
Payment in excess of Rs 20000 (wef A.Y. 2018-19 Rs 10000/-) in a day in respect of any expenditure incurred in the current year or in the previous years otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account will be disallowed while calculating profits of an assessee.
Please note that in case your transaction fall in any of the above sections that it is punishable. But if it is under any exception of these section then it is not. 
 
Exceptions to section 269SS

1.  Any loan or deposit or specified sum “taken or accepted from” or “taken or accepted by” the following entities –

a. The Government
b. Any banking company, post office savings bank or co-operative bank
c. Any corporation established by a Central, State or Provincial Act
d. Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013)
e. Any institution, association or body or class of institutions, associations or bodies notified in Official Gazette
Thus, if any person accepts any loan or deposit or specified sum from the above-mentioned entities, or the entities accept any loan or deposit or specified sum from any person, provisions of 269SS will not apply.

1. A person earning only agriculture income accepts loan or deposit from  another person also earning only agriculture income
2. Receiving cash from relative during emergencies. Here intention should not be to evade the taxes.
3. Partners contributing cash capital into partnership firm

 
 
Exception to Section 269T:-
A person paying Rs. 20,000 or more towards repayment of loan or deposit does not have to comply with 269T if he pays to the following parties –
a. The government,
b. Any banking company, post office savings bank or co-operative bank,
c. Any corporation established by a Central, State or Provincial Act,
d. Any Government company as defined in section 617 of the Companies Act, 1956,
e. Other notified institutions
 
 
Exception to section 269ST:-
The following are the exceptions under Section 269ST of the Income Tax Act:

• The provisions of Section 269ST of the Income Tax Act would not applicable to the following.
  • The Government
  • Any banking company
  • Any post office savings bank
  • Any co-operative bank
• Transactions with a nature mentioned under Section 269SS of the Income Tax Act are considered exceptions under this Section.
• Any other individual/ person or a class of persons or receipts that the Central Government may specify through the notification in the Official Gazette.
• If you are repaying the loan to NBFCs or HFCs, the one instalment of loan repayment shall constitute a single transaction. And so if the single loan instalment amount is less than Rs.2 lakh, it can be paid in cash. All the instalments paid for a loan shall not be aggregated for the purposes of determining the applicability of Rs.2 lakh limit.