Hi Jupiter and everyone,
:idea: As far as I am concerned, this sentence is incorrect. "
Life that we know it is based on the element carbon."
The problem is with "Life that we know it". It is an adjective clause of which "Life" is the antecedent". And "that" is a relative pronoun used to replace "Life" which is the object of "know"."What you know is life and it is life that you know.

That is why it is not right to mention "it" again because it has already been replaced by 'that'.
An adjective clause is a clause that is used to replace a noun or some pronouns. A noun or some pronouns are called "Antecedent" which can be a subject or object. Moreover, the antecedent is replaced exactly by 'relative pronouns such as these 'who/whom/that'.
Ex: Bopha is
the girl whom I love. (object)
----"whom" replaces 'the girl' and is an object of 'love'.
Bopha who is a good student is clever. (subject)
----"who" replaces 'Bopha' and is a subject of 'is' here.
:arrow:
Thus, the sentence should be "Life that we know is based on the element carbon."