[BUG] VSCode extension repeatedly asks for permission to edit files, even if Auto is selected

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

When Claude Code Chat wants to edit a file, it asks for permission to edit eventhough "Auto" option is enabled.

What Should Happen?

When "Auto" is selected, edits should be allowed with Claude code asking it each time.

Error Messages/Logs

No errors, just the same behavior repeated.

Steps to Reproduce

Open a project in VS Code
Send a prompt to Claude Code to make some changes to the code/create new files
Chose "Auto" option.
Witness the same prompt repeated permission prompts.

Claude Model

Opus

Is this a regression?

Yes, this worked in a previous version

Last Working Version

previous version

Claude Code Version

2.1.232

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

Other

Additional Information

I use Claude code extension in VS Code.