Take cashews, melon seeds, and peanuts in a bowl. Pour hot water on them, cover & let sit for at least ½ an hour.
After ½ an hour the nuts will become soft. Drain the water out & keep it as a reserve.
Put the nuts in a blender, use the water reserve to blend into a smooth paste. Keep aside.
Take 2 Tbsp oil in a pan on medium heat, add onions to it & saute till translucent.
Add tomatoes, saute for 10-12 minutes till mushy. Now add cashews, melon seeds, and peanut paste; cook on medium heat for 5 minutes and turn off the heat.
Cool down the mixture, blend into a smooth puree using little water and keep aside.
Transfer the puree in a saucepan and cook on low.
Meanwhile, take 1 Tbsp oil & 1 Tbsp butter in another pan. Add ginger/garlic paste, sauté for 2 minutes. Now add Kashmiri red chili powder, deggi mirch powder, garam masala, turmeric powder, coriander powder, green chili (optional) to the oil, mix thoroughly. Sauté on low heat for 2 minutes.
Add 2 Tbsps. of water & turn off the stove. This keeps the masala mix from burning.
Add masala mix to the blended puree. Add approximately 1- ½ Cup of water to the masala pan to scrape off any leftovers. Add it to the saucepan. Simmer for 2 minutes.
Add sugar and Salt. Cover and simmer for half an hour on medium heat.
Add butter and kasuri methi. Then add paneer. Simmer for 10-15 minutes.
Paneer in creamy, nutty sauce is ready to be served hot.