Main documentation: The following 2 items explain the Inplace Upgrade process. No 1) shows the basic idea and No 2) goes even more into detail:

(Important: Please follow all the steps in No 2) exactly in the given order and plan enough time for tests)

1) http://technet.microsoft.com/en-us/library/jj733502.aspx

2) http://www.microsoft.com/en-us/download/details.aspx?id=14599 (Note: This used to be updated about every 3-4 month, so it makes sense to check here for updates)

Best practice advices:

http://blogs.msdn.com/b/axsupport/archive/2011/12/11/planning-your-data-upgrade-to-microsoft-dynamics-ax-2012.aspx

http://blogs.msdn.com/b/axsupport/archive/2012/01/27/microsoft-dynamics-ax-2012-upgrade-using-the-state-transfer-tool.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/12/09/ax-content-microsoft-dynamics-lifecycle-service.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/11/11/ax-content-how-to-install-cu7-for-microsoft-dynamics-ax-2012-r2.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/06/27/struggling-with-updates-we-ve-got-some-help.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/05/23/database-diagrams-for-ax-2012-r2.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/10/03/ax-2012-r2-connecting-a-dynamics-online-payment-service-to-ax-accounts-receivable.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/02/19/new-changed-and-deprecated-features-guide-has-been-updated.aspx

http://blogs.msdn.com/b/axsupport/rss.aspx?tags=ax+2012+r2

Known issues:

http://blogs.msdn.com/b/axsupport/archive/2013/04/19/ax-2012-r2-in-place-upgrade-sometimes-during-the-data-upgrade-checklist-the-detect-update-scripts-step-does-not-prepare-any-scripts-to-run.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/03/20/fix-for-ax-2012-r2-in-place-upgrade-database-setup-error-an-item-with-the-same-key-has-already-been-added.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/09/06/troubleshooting-upgrade-and-cu-batch-jobs-stuck-in-a-waiting-status-in-dynamics-ax-2012.aspx

http://blogs.msdn.com/b/axsupport/archive/2012/11/05/troubleshooting-data-consistency-issues-during-upgrades.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/02/21/ax-2012-pre-requisite-checker-sees-both-the-old-sql-and-the-upgraded-sql-instance.aspx

http://blogs.msdn.com/b/axsupport/archive/2012/11/02/cannot-copy-table-sqldictionary-error-when-connecting-to-source-database-during-upgrade.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/07/12/missing-syp-labels-after-upgrading-to-ax2012-r2-cu6.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/10/11/issue-with-number-sequence-after-upgrade-to-ax2012-r2-in-place.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/03/20/tier-2-country-labels-are-not-upgraded-during-ax-2012-r2-in-place-upgrade.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/11/06/unexpected-compiler-errors-installing-cumulative-update-7-for-microsoft-dynamics-ax-2012-r2.aspx

http://blogs.msdn.com/b/axsupport/archive/2012/04/19/turn-off-keep-update-objects-in-ax-2012-for-new-installations.aspx

http://blogs.msdn.com/b/axsupport/archive/2013/10/22/dynamics-ax-2012-r2-how-to-choose-location-of-export-for-excel-from-rdp-session.aspx

http://blogs.msdn.com/b/axsupport/archive/2014/01/08/violation-of-primary-key-constraint-pk-modelelementdata-elementhandle-error-installing-some-hotfixes-on-microsoft-dynamics-ax-2012-r2.aspx

As an extra effort please share the following hints to your colleague Amit regarding AX object ID conflicts:

http://blogs.msdn.com/b/mfp/archive/2011/07/11/the-solution-to-the-element-id-problem.aspx