In large skillet, heat olive oil over medium heat. Sauté onion for 2 minutes. Add garlic, and cook additional 2-3 minutes, or until fragrant. Stir in crushed red pepper and bay leaf.
Add white wine and mix in tomato paste and stir until thoroughly mixed. Add crushed tomatoes, water, Italian seasoning, sugar, fresh parsley and a few pinches of salt. Stir together, and bring to a light boil. Reduce heat to low. Cover and simmer while you prepare chicken, stirring occasionally.
On a cutting board or mat, using a meat mallet, pound each chicken breast, until slightly flattened. Season chicken on both sides with salt, pepper, garlic powder, onion powder and paprika. Use your hand to rub seasoning into chicken.
In a small bowl, beat eggs. In another shallow dish, combine bread crumbs and 1 cup of parmesan cheese. In another shallow dish, mix 2 tsp. of salt, 1 tsp garlic powder, 1 tsp of onion powder, 1 tsp of black pepper and 1 tsp. of paprika. Dip each piece of chicken in flour, then egg, then bread crumb mixture. Repeat this until each piece is battered.
In a skillet, heat about 1 inch of vegetable oil over medium-high heat. Drop a bit of your flour dredge in oil. If many small bubbles starts to form, then your oil is ready to fry. If large hard bubbles forms, then your oil is too hot. Fry chicken breasts for 3 minutes on each side. Remove and let rest on plate.
Preheat oven to 375 degrees.
Taste sauce and more salt or sugar if needed. Add 1 cup of parmesan cheese to sauce, and stir until cheese is melted.
In a baking dish, spread a generous amount of sauce in the bottom. Add cooked chicken and top each chicken breasts with sauce. Top with Mozzarella cheese. Cover loosely with foil and bake in oven for 25 minutes. Remove foil and cook additional 15 minutes, or until cheese is slightly browned.
Serve with sides of choice. Linguine or spaghetti recommended.