Why update the no_proxy? Generally access to azure resources is going through public endpoints at first. Especially for sensitive stuff like keyvault and storage, this shall happen through private endpoints. While traffic to public endpoints have to be routed through the webproxy, for privat links we have a direct connection, so it shall not go trough the proxy. So for each private link, the fqdn has to be added to the no_proxy so that calls from atlantis (or terraform) are redirected properly.
