To capitalize or not?

To capitalize or not?

I’ve just had a very peculiar response to an English proofread I completed for a German speaker.

She had written a letter thus:

Dear James,

it was lovely to see you at the weekend….

Naturally I corrected the ‘it’ to read ‘It’; she responded ardently stating that this should not be capitalized; I checked around to confirm I was correct, looking at business letter templates and so forth and found no version that wasn’t capitalized.
But in fact grammatically speaking it’s right, isn’t it? There is no other time we’d capitalize after a comma, so why do we in a letter?

What do you think? Has anyone ever seen the rule that states the beginning of a letter should be capitalized?