You are right. Nothing is allowed in the working space. If you visualize a box that is 30 inches wide, 36 inches deep, and 78 inches high (about the size of the cardboard box a refrigerator might be shipped in), you have to be able to set that box in front of the panel. The box can have its left (or right) edge flush with the left (or right) edge of the panel, or the panel can be anywhere in between.
But I understand that, in your case, you wouldn?t be able to get the edge of this box flush with the edge of the panel, because the box would bump into the ATS door handle. If that is right, you have both a code violation and an unsafe condition. The danger would be that if an electrician had the panel cover off, and was working inside, he or she might bump their shoulder against the ATS door handle. Their likely ?jerk reaction? to the bump could easily cause a hand to touch something unfortunate inside the panel.
Again, you are right. For the sake of the safety of a future worker, stand by your convictions on this one.
Welcome to the forum.