So when we see Itachi and Shisui in the past, Shisui is the one who asks the 3rd hokage about trying to divert the Uchiha Coup on his own for which he get's approval by the third Hokage at which Danzo was also present.
When Shisui tried to use genjuitsu on his clan, he's intercepted and attacked by Danzo, surely the hokage didn't approve of that. Shisui was able to tell Itachi of what happened, but why didn't Itachi tell the Hokage about Danzo's betrayal?
This is a speculation, but given that Danzo was the head of ANBU Black ops, it is most likely that they don't leave any trace whatsoever that can be tracked back to Danzo. Thus the only "proof" of Danzo attacking Shisui would be Shisui's own testament and Itachi's second hand testament. And given that Shishui's genjutsu, "koto amatsukami" is a complete hypnosis, who would believe Itachi?
Danzo can just claim that Itachi is under Shisui's genjutsu and that Shisui did that to blacksheep him. Danzo is a high official. Accussations towards him without any proof would result in heavy retaliation. Especially since by that time the Uchiha clan is already suspected of planning a coup.
This, I think, is why Itachi cannot tell Hiruzen. It would not solve anything. It will only smear Shisui's good name.
He should have.But Itachi knew that since Shisui was dead,there was no other option but to murder the entire clan-he did not want to draw unnecessary attention now.He just wanted peace.He could have even avenged Shisui by finishing off Danzo but he didn't do that.
Hiruzen would have believed itachi, as hiruzen knows how shady danzo is and as soon as all the Uchiha’s were massacred, hiruzen quickly deduced that Danzō was responsible.
Itachi didn’t tell hiruzen because there was no point, itachi would still have to murder his clan.
All of these answers are nice attempts and respectable, but the real answer is he used it as leverage against Danzo once he left the village. You have to remember that Itachi was a pacifist, and reporting that problem to Hiruzen would cause an internal problem in the Hidden Leaf Village.
The answer someone said about Danzo accusing Itachi of being under Shisui's genjutsu is completely out of the question. Itachi's is Shisui's disciple and also a formidable Uchiha, which is why Hiruzen brought him into the Anbu and he was made captain at only age 13.
Because the plot was badly-written.
Hiruzen didn't move a finger to befriend the Uchihas even though he wanted to. He was too afraid to move without the agreement of the council. Itachi was an idiot as well for not exposing Danzo and talking to Hiruzen and maybe even to Fugaku to set up a meeting so they can actually discuss intentions.
The only ones that wanted the Uchihas to stay caged were Danzo and those two fossils, Hiruzen was just too passive to do anything about the Uchiha clan. He could have easily talked to Fugaku and told him "man, I want the Uchihas to feel welcome and at home within the leaf village" yet he didn't. Fugaku was also thinking about peace but he also didn't go talk to Hiruzen. Overall, it was just bad writing.
Also, the coup was coming close because nobody was giving the Uchiha clan anything, they were kept at the border of the village, they could have negotiated things so easily but they didn't.
