Sri Aurobindo distinguishes between error, which is an imperfection of knowledge, and falsehood, which is a distortion of knowledge. Error can be understood as a transitional process of evolution of consciousness; wihle falsehood requires something more. The added ingredient here is the development of the ego-sense.
The ego has as its primary goal some form of self-affirmation, whether it is the physical ego, the vital ego or even the mental ego. The ego looks at things from the point of view of what it believes to be in its own interest and from its own limited standpoint, and can actually distort the facts and the significance of the facts to suit its own needs and desires. “This surface mental individuality is egocentric; it looks at the world and things and happenings from its own standpoint and sees them not as they are but as they affect itself: in observing things it gives them the turn suitable to its own tendency and temperament, selects or rejects, arranges truth according to its own mental preference and convenience; observation, judgment, reason are all determined or affected by this mind-personality and assimilated to the needs of the individuality and the ego.”
“Here we have an almost inexhaustible source of distortion of truth, a cause of falsification, an unconscious or half-conscious will to error, an acceptance of ideas or facts not by a clear perception of the true and the false, but by preference, personal suitability, temperamental choice, prejudgment. Here is a fruitful seed-plot for the growth of falsehood or a gate or many gates through which it can enter by stealth or by an usurping but acceptable violence. Truth too can enter in and take up its dwelling, not by its own right, but at the mind’s pleasure.”
Sri Aurobindo, The Life Divine, Book 2, Part I, Chapter 14, The Origin and Remedy of Falsehood, Error, Wrong and Evil