Hi Rachit,
You don't need to place those files in EPS/In directory, Just maintain the downloaded files and xml file
in one directory and give the path of the xml location when sum prompts as shown below 
I am stuck in the same situation, trying to update Basis(KB74008.SAR) and Aba (KA74008.SAR) packages from SUM (latest version) and copy the .SAR file in EPS/in and try to upload the same in SUM, and getting the error: Incorrect input; provide the correct path to the directory.