Niantic consider IITC (and any other unofficial software) against the Ingress ToS. However, just because something is against the ToS it doesn't mean Niantic will enforce it.
However, in early December 2013, many people started to believe Niantic were banning people for using IITC. This is not the case. However, the following events have lead to this belief:
Given that a large number of serious Ingress players use, or have used, IITC, it isn't surprising to find that if Niantic ban someone by mistake, they have used IITC.
I believe none of these 'ToS violation' bans are related to IITC. Rather, Niantic have been working on more aggressive catching of cheaters and other ToS violations - spoofing, bots, multiple accounts, account sharing, etc. These things are inherently hard to detect though, and Niantic are likely to make mistakes sometimes, banning legitimate players.
Note that Niantic have remained completely silent on the reason for any of these bans. This is partly because if they did say what someone had been banned for doing, it might lead to cheaters knowing what they can and can't get away with.
However: IITC is against the Ingress ToS - so it's sensible to be cautious. Don't publicly share screenshots from IITC in the official Ingress community, or with the official Ingress/NIA G+ accounts.
I've seen several comments of the form "IITC was sent a takedown notice, and at this point it moved to Github and kept going". This is not true.
So, was 'IITC' sent a takedown request? No - this website, and the IITC G+ page, have not been sent such a request.
On 27th November 2013 Niantic made a major change to the protocol used by the intel map to display portals. Before this date, the full data for every portal on the map was sent to the browser, so IITC could take advantage of it and provide various features - resonator search, mitigation highlighters, portal age lists, many highlighters, etc.
After this date they only send the bare minimum of data for all the portals on the screen. The data available is:
IITC can also count links/fields visible on the map, but this is not accurate when zoomed out to larger areas as the server does not send the smaller links/fields.
It is still possible to get the full details for individual portals, but only one at a time. Some people have suggested making IITC do this automatically with a plugin - but it's very likely that Niantic will monitor the portal detail requests for this kind of abuse and suspend/ban anyone caught doing it.
Some people think that Niantic made this change just to break IITC. This is not true. It was a sensible change to make to optimise the intel map, and I'm surprised they waited so long.
Occasionally the Niantic servers give this misleading message - what it should usually say is "Failed to check account status - please reload to try again".
Sometimes this is caused by server issues, and no amount of reloading will fix it. Come back later and try again.
However, another reason for this message is your account being blocked/suspended by Niantic. There are no (known) cases of this happening due to IITC use, but any use of bots, unofficial clients (e.g. iPhone, broot), or other ingress mods (auto-drop/pickup apps) could lead to this. In this case, the scanner app will also fail to work correctly ("Scan failed" error message).