Inquisition was created by the church to reduce extrajudicial killings. If you let people believe in magic, they may start worshiping the strongest wizard. With inquisition, if you think somebody is a witch, you have to initiate a trial. Disagreeing with the results of the trial equals claiming to know more about magic than the church. Such claims would make you, yourself, a witch or a heretic. Coincidentally, eradicating heresy was the second purpose of the inquisition.