Gently press the paneer cubes between paper towels to remove excess moisture and set aside.
Heat oil in a heavy-bottomed pan over medium heat. Once shimmering, add cumin seeds and wait until they crackle, releasing a warm aroma.
Add the chopped onions to the pan and sauté, stirring occasionally, until they turn golden and fragrant, about 8–10 minutes. The onions should be soft and slightly caramelized.
Stir in the chopped or crushed tomatoes and cook until the oil begins to separate from the mixture, about 10 minutes. The tomato mixture should look thick and glossy.
Add the soaked cashew nuts to a blender or mortar and pestle, blend into a smooth paste, then stir it into the tomato mixture. Cook for another 5 minutes until the gravy thickens and develops a rich, reddish-brown color.
Lower the heat and add garam masala, turmeric, and red chili powder. Pour in water or stock and stir well. Let the gravy simmer uncovered on low heat for 10–15 minutes, until it coats the back of a spoon and releases fragrant spices.
Gently fold in the paneer cubes, making sure they are submerged in the gravy. Continue simmering for 5 minutes to allow the flavors to meld and the paneer to absorb the spices.
Stir in the heavy cream or coconut cream, gently mixing until the gravy turns silky and luscious. Simmer for another 2 minutes, then turn off the heat.
Let the dish sit for 5 minutes to allow the flavors to settle and the gravy to thicken slightly. Taste and adjust seasoning with salt if needed.
Serve the warm Paneer Lababdar hot, accompanied by naan or steamed rice for a comforting, rich meal.