Heat one-fourth cup of the oil in a skillet over medium heat. Add the peppers and cook, stirring, until they are soft, about 5 minutes. Drain and set aside. Place half the carrots and 3 of the eggs in a food processor. (If you have a large food processor, you will be able to make the entire mixture in one batch.) Process until carrots are finely chopped. Pour the mixture into a large bowl and repeat with the remaining carrots and eggs. Stir in the matzo meal and add salt to taste. The carrot mixture should be somewhat loose, but firm enough to form into patties about 4 to 5 inches in diameter. Mix in a bit more matzo if the mixture is too moist.
Heat a thin film of oil in a frying pan over medium heat. Fry the pancakes, two to three at a time, until lightly golden, about 4 minutes on each side.
Remove from the skillet and drain on paper towels. Repeat until all the batter is used. You should end up with about 6 pancakes. Layer the pancakes in a shallow casserole. Combine the tomato sauce, sugar, peppers, and one-fourth cup water in a bowl and mix well. Pour the sauce over the pancakes and bake, uncovered, in a 325- degree oven for 30 minutes.