Which is better, AC unit 1 Ton with 400 CFM , or AC unit 1 Ton with 350 CFM? & why?

It actually depends on the requirements. If less CFm with ducted units then small ducting is required keeping in mind that tonnage is equal. Also for more CFM By pass factor can be more fan speed and noise can be more. I am saying in general not for350 or400 CFM only.

400 is better ...because the air cfm will be decrease through the duct due to friction 

500 is not good because the air will not touch the coil properly .

Certainly more airflow rate cooled by a tonnage of refrigerant will be better. In a general case where a room is to be cooled by a unitary system; thumbrule is1TR shall be capable of cooling300 to400 CFM with minimum fresh air induction. If the space is big enough where the air-side system is central equipment,1 TR shall be capable of cooling500 CFM or in certain cases550 CFM where the fabric heat gain is minimized by smart architectural elements that reduces solar heat. There are also cases where100% fresh air is required with no recirculation; here1 TR shall be capable of cooling only150 CFM. Circulation of room air shall definitely have less impact on the cooling coil as it has the cooling from the room return;compared to a batch of fresh air at ambient condition.

i believe that the lower the speed of cfm the higher it chances of reducing by pass factor hence more efficient cooling

Δt = (Output capacity)/(1.10 x air quantity)

considering 8000 BTU as sensible load

Δt = 8000 BTU / (1.10 x 400) = 18

Δt = 8000 BTU / (1.10 x 350) = 20

so that mean for the same TR reducing CFM will produce more temperature difference

In our opening statement we quoted a rule-of-thumb about air conditioning requiring400 CFM per ton. This value is usually the basis for rating self-contained air conditioners. Thus, we have a2-ton unit handling800 CFM, a3-ton1,200, a5-ton2,000, a10-ton4,000, etc. With80° F DB50% RH (77 gr/lb) air entering, these units usually will do about70 percent sensible cooling and30 percent latent cooling. On this basis, a3-ton unit would do36,000 Btuh total cooling,25,200 Btuh sensible cooling and10,800 Btuh latent cooling. With400 CFM per ton, air would be cooled according to: T2 - T1 = 25,200/1,200 x1.08 =19.4° F and would leave the coil at80° F -19.4° F =60.6° F. Air would be dehumidified according to: G2 - G1 =10,800/1,200 x0.68 =13.2 grains and would leave the coil at77 -13.2 =63.8 grains or57° F WB.

Basically it depend on the results of Load Calculation,  although there is not much difference between 400 CFM and 350 CFM but it depend on manufacturer may be 350 CFM and 400 CFM are not the same model.

Based on the Analysis done by : شريف محمد ابراهيم مصطفى  Senior HVAC Engineer I recommend to select the higher model i.e.,  1 RT with 400 CFM considering future expansion or aging etc.

Δt = (Output capacity)/(1.10 x air quantity)

considering 8000 BTU as sensible load

Δt = 8000 BTU / (1.10 x 400) = 18

Δt = 8000 BTU / (1.10 x 350) = 20

so that mean for the same TR reducing CFM will produce more temperature difference