- *It's? (ungrammatical)
- It is? (grammatical)
In English every utterance must have at least one stressed syllable.
In example (1) we see a contraction of the words it and is. However we can only contract the word is when it isn't stressed. Because this is a one word utterance and every utterance must have a stressed syllable, this word must be stressed. And because it's stressed, this contraction is ungrammatical.
Sentence (2) is fine, because the word is can be stressed when it isn't contracted. We would normally pronounce this question like this :