Add the tomatoes, onions, carrots, cashew nuts and garlic to a pressure cooker/instapot and cook till soft (3 whistles is a pressure cooker/ 8-10 minutes in Instapot). Allow the cooker to cool down.
Grind the cooled vegetables and cashew nuts to a smooth paste. Reserve the water in which the vegetables were boiled for use later.
Heat a saucepan with 2 tbsp of oil or butter. Add the black pepper, cinnamon and bay leaf. Once the spices release their aromas, pour in the vegetable puree.
Cook on low-medium flame with some reserved water from the cooked vegetables. Once the gravy starts to simmer, add the Kashmiri chilli powder or paprika and garam masala.
Bring the gravy to a simmer. Add the honey and salt to taste. You may shallow fry the paneer before adding it or just add it directly.
Simmer for another 1-2 minutes, just long enough to heat the paneer through.
Turn off the flame and serve the healthiest paneer masala recipe piping hot!