How to cite a paragraph in project report?
When you use someone else's words verbatim, you must either 


put it in quotation marks, or 
indent the paragraph (make it a block quote) 


to indicate that those words are not your own. (Most style guides recommend block quotes for long quotations.)

You must also indicate somewhere near the paragraph (e.g. in a footnote, parenthetical reference, or other kind of inline citation depending on what citation style you use) which source in your reference list it comes from. (You must do this - indicate what source it comes from - any time you use someone else's ideas or material you found in a reference, even if you summarize or paraphrase it in your own words.)

In general, a rule of thumb for avoiding plagiarism:


For any idea or information that isn't your own work, clearly indicate where it comes from. (Excluding facts that are "common knowledge".)
Additionally, make it clear any time you use words or images that you didn't write/create yourself. (For example, with quotation marks, block quote formatting, or image credits in the caption.)