All cells in the body require water and nutrition and must get rid of waste, so osmosis and diffusion occur in every cell in every organism. If any cells could not perform these functions, it would either dry up and die through lack of water, it could stop functioning and die through lack of nutrition, or could become full of waste and possibly become toxic and ide, and possibly cause the whole organism to become ill.
It takes place in the cells, between the cell membrane, cytoplasm, and the liquid out side of the cell.