Rinse and wash the capsicum with enough water and chop it in to medium sized pieces. Discard the seeds. Heat a pan with oil, lentils and red chillies.
Saute the lentils for few minutes. When they change color, include chopped capsicum. Continue sauteing till capsicum is little soft. Switch off flame. Include grated coconut, tamarind and salt. Toss them together.
Take all the roasted ingredients in a mixer and grind to coarse puree with enough water. Finally heat a tempering pan adding oil, mustard seeds and black gram lentils. As the mustard splutter pour over the chutney. Unique flavored capsicum chutney is ready to serve as side dish with idli and dosa.
Notes
Do not roast capsicum for long. The veggie needs less time to get soft.
The grated coconut doesn't have to be roasted. Include it after switching off the flame.
I used two red chillies (byadagi variety) and it was mild in spice. You can adjust as per your taste.