They cannot really claim 'not to have any space' if they have chosen to expand their Sixth form. A popular school in Bucks was criticised for this and has had to limit external admissions to the sixth form - the appeal panel picked it up at stage 1 but it did not stop the school winnnig that stage.
Confirms my point that what really matters is the prejudice of exceeding the PAN in the year group in question.
What would the best way to tackle this? If the school is still likely to win stage one - Is there any point in bringing this up?
Although the school is likely to win stage 1, there's no reason why you shouldn't politely chip away at their case - it could still help at the balancing stage.
If they are putting forward arguments that don't stand up to scrutiny (for example, talking about all the problems of general overcrowding, but simultaneously expanding the 6th form), you could request an explanation.