I am afraid you're wrong, Marwa. The correct answer is its. Sooner, you are right it's = it is/it has and its = the possessive form.
It's => It is
You're => You are
Every dog has its day
I choose "its" and the answer looks right.
Every dog has its day.Now i see
Thanks all. I used to had confusion between "it" and "its", not much of problem of using "it's". Now I'm much clearer
Its: possessive adj
It's: contracted of "It is" or "It has"