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I don't have a personal experience with this, but IMO, just be honest with everything.
Prepare all the documentation you could (proof showing you guys are friend from childhood, signed declaration of your friend that the sale was bonafide/payment option and all the record of payments), go to tax branch, tell the exact story you posted and ask them if these would be enough. If not, what would be the appropriate document? (the most I can think of would be an affidavit from your friend as an even more formal form of declaration)
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Nothing for now
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