Explanation for not claiming ITC (Input VAT credit)

My partnership firm received notice from department for not claiming ITC (Input VAT).

Brief background: Initially we claimed VAT credit but as the vendor did showed sale and not deposited VAT amount with department, it came as mis-match with us. Thus we revised the Return and submitted without claiming credit. Subsequently, vendor deposited the VAT. Thus now department is asking us reason for not claiming ITC.

What should be done for proper compliance.