I've had exactly this problem before, with another smart controller (before my Iro).
In my case, it was a faulty wire between the controller and the sensor. Simple way to troubleshoot (what I did) was to remove the rain sensor from its external mounting location, and connected it directly to the controller with a short (12") test wire, and then activate/deactivate manually using the test button. I used some 16 gauge speaker wire I had laying around. When I did that, the problem went away, which confirmed the wires as being the problem. I ran new wires to my exterior mounting location and problem was solved.
If you find the problem persists with the short/test wire, then I'd try a different sensor connected directly to the controller (with the test wire setup). You can get sensors for less than $20 at home depot. I use this one with my Iro and it works fine. You can always return it as long as you package it back up correctly (don't cut the wires in the box).
Maybe you don't have the same problem, but in any case, this could help you rule out the wiring and/or the sensor as being part of the problem.