What's stopping them from just complaining when you have no SMS or contacts? They would just show a new dialog saying "Give us the real permissions".

Yeah but that’s a legitimate GFY situation where you would infuriately delete the application.

Assuming it's a built-in iOS/Android feature, hopefully app review would catch apps trying to circumvent the fake permissions, and the risk of blocking real users would probably discourage them (I almost never use SMS unless it's for a verification code, and I have no reason to keep those messages).

Then you get an app that can generate fakes. Seems very fun to make

iOS has this with the photo album permission at least. You can select to only reveal a select subset of your photos to an app. I assume Android has something similar.

Someone had that in the early days of Android. If you denied an app access to your contact list, the app saw a list of fake contacts.