Possible regression: incorrectly ret type detected in of __new__

[neutrinoceros]

Bug Report

new versions of mypy seem to misinterpret the return type of the __new__ method defined below

To Reproduce

# t.py
class A:
    def __new__(cls, *args, **kwargs) -> "B | C":
        if cls is A:
            cls = B
        else:
            cls = C
        return object.__new__(cls)

class B(A):
    pass

class C(A):
    pass

checking this file gives

$ mypy t.py
t_typ.py:2: error: "__new__" must return a class instance (got "Union[B, C]")
t_typ.py:7: error: Incompatible return value type (got "A", expected "Union[B, C]")
Found 2 errors in 1 file (checked 1 source file)

The first error is not new and was already discussed in #1020, I'm okay with it being marked as "won't fix" even though my opinion diverges.
The second error however (error: Incompatible return value type (got "A", expected "Union[B, C]")) appeared at some point after mypy 0.910 and mypy 0.920, and I believe that it is not correct.
Indeed the return type of the method is detected as A, but it is guarded against by the if/else clause above.

For reference, a pattern similar to the one I'm usin described can be found in CPython's standard library, in pathlib.Path.__new__:

    def __new__(cls, *args, **kwargs):
        if cls is Path:
            cls = WindowsPath if os.name == 'nt' else PosixPath
        self = cls._from_parts(args)
        if not self._flavour.is_supported:
            raise NotImplementedError("cannot instantiate %r on your system"
                                      % (cls.__name__,))
        return self

Expected Behavior
Only the first error should show up. None at all would be ideal in my opinion, but that seems out of line here.

Your Environment

• Mypy version used: 0.910 and 0.930
• Mypy command-line flags: none
• Mypy configuration options from mypy.ini (and other config files): none
• Python version used: 3.10.0
• Operating system and version: MacOS 12.0.1

[sobolevn]

Moreover, this code is not even valid:

class A:
    def __new__(cls, *args, **kwargs) -> "B" | "C":
        ...

It is a runtime error:

Traceback (most recent call last):
  File "<stdin>", line 1, in <module>
  File "<stdin>", line 2, in A
TypeError: unsupported operand type(s) for |: 'str' and 'str'

It should be: "B | C"

[neutrinoceros]

oh sorry, I got excited and tried to use Python 3.10 syntax, but the actual code I'm checking is using Python 3.7 compatible idioms, I'll edit the OP. Thanks !