The whole experience of IIT, and most of the learning there, happens outside the classroom. We have many examples of 4 and 5 pointers becoming good CEOs, IAS officers and even IIT Professors.
Students are coming to a high pressure environment, where everyone is a school topper. In that scenario, someone loses out in the relative grading structure. Putting added pressure of informing the parents, without offering professional counselling for these students, would result in a tinder box waiting to explode.