Context is everything with the bigger house to the left.
That property is to the north of the (now smaller, sandwiched) middle house and, when you see what it in turn is next to, the front and back of the new house align with the front and back of that neighbour.
The only property that would therefore actually have been potentially affected by light from this even bigger property isn't affected by it at all due to its own size and position. The bigger house does extend beyond next door at the back, but it's a single story extension only, not full height, like the other house.
The one that has now been rejected steps out significantly from the house to the northern side of it thereby blocking light from the back of their house. The back gardens are ESE facing, so the back of their house will be in shadow much earlier than before it was built.
The original plans were for the back of the two properties to be aligned, but the builder "accidentally" built it 3m longer.
The originally planned house was by no means small or crap.
The kitchen, for example, was supposed to be 8m (26ft) x 6.5m (21ft). The new kitchen is now 11m (36ft) x 6.5m!
The house they got permission for was plenty big enough. They just took the piss and thought no one would care if they built it bigger and blocked the neighbour's right to light in the process.