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Place the cashews and water in the bowl of a blender. Blend into a smooth paste.
Heat oil in a large Dutch oven or saucepan. Place the slices of tofu in the hot oil, making sure they don't overlap. Cook the tofu slices on both sides until browned. Remove the tofu to a plate.
To the same pot add the cumin seeds and asafetida, if using. Wait 30 seconds for the cumin to turn slightly darker, then add the onions along with a generous pinch of salt. Sauté the onions until they are very soft and beginning to brown.
Stir in the ginger garlic paste and sauté for 30 seconds longer.
Stir in the tomato paste and mix.
Add the spices to the pot- ground coriander, ground cumin, turmeric, cayenne and garam masala. Mix them into the onions in the pot. Stir in the prepared cashew paste.
Add a cup of water to the pot and bring the sauce to a boil. Let the sauce cook 8-10 minutes until you see specks of oil on the top. Stir in the bell peppers and mix.
Place the reserved slices of tofu into the sauce. Cover the pot and let the do pyaza cook another five minutes. Check seasoning and add salt as needed.
Heat the oil for the tadka in a small pan. Add the onions, jalapeno if using, and garam masala. Let the onions sear in the hot oil for about a minute.
Turn off the heat and pour the hot tadka over the tofu do pyaza. Add cilantro and stir in. Serve hot.