The passage that you are looking for is a couple pages from the end of chapter 12. Finny admits, for the first time, that has desparately wanted to be a part of the war. He had been submitting his application to every single branch of the military, hoping that they would accept him into the war to fight. Unfortunately, because of his leg, he was rejected everywhere. He states, "I'll hate it everywhere if I'm not in this war!" Then, he explains why he had been coming up with the entire "there is no war" scenario that he had been touting all winter. It was because if he couldn't be in the war, then there just simply couldn't be a war. It was a form of denial for him; the truth that he couldn't be accepted into the military because of his leg was just too harsh to deal with, so he invented an alternate reality that helped him to cope with it. He said that
"two seconds after I got a letter...saying 'Yes, you can inlist with us'"
he would have finally dropped the pretense and admitted that there was a war. This denial is a characteristic of Finny's; when Gene tries to tell him about what happened at the tree, Finny denies that too, and instead comes up with more acceptable versions of what had happened, that suit his world better than the harsh reality that his friend could have done that to him. Finny shows a tendency to side-step any truth that is hard to deal with; he does this with the war, and with the truth of what Gene did to him. His nature is to focus on the positive side of life, and of human nature.
I hope that helps; good luck!