Take a mixing bowl. Cut Paneer into large, cube-sized pieces.
Add Kashmiri lal mirch powder, 1/2 tsp black pepper powder, salt, and 1/2 tsp soy sauce. Mix well.
Add 2 tbsp corn flour and coat paneer with it.
Heat 2 tbsp of oil in a kadhai/wok and spread it evenly
Put Paneer pieces in the kadhai and fry on medium flame.
Take out the fried pieces and add 3 tbsp of oil on high flame.
Add chopped garlic, chopped ginger, and chopped green chilli.
Add onion petals and chopped capsicum and toss on high flame.
Add 1 tbsp soya sauce, red chilli sauce, schezwan chutney, degi mirch, 1/2 tsp black pepper powder, salt to taste, and cook on low flame.
Mix 1 tbsp corn flour with 4 tbsp water to prepare a slurry and keep it aside.
Stir the curry and cook for 1 minute. Add 1.5 cups of water. Let it come to a boil.
Now add the corn flour slurry to the gravy and cook on high flame to achieve the desired consistency.
Now add fried paneer cubes to the gravy and cook for 1 minute on high flame. Stir in between.
The chilli paneer gravy is ready now. Enjoy.