From al-Malfūdh Sharīf, Pg 341:

Question

How must one reply to the Salām of a young ghayr mehram woman?

Answer

Reply to her softly in the heart and not loudly.

QUERY
To whom are we not allowed to make salaam? Can we make salaam to a person who gambles or plays cards etc. What about when a person is eating, reciting Quran and reading wazifas etc. Can we reply to the salaam when the persons are engrossed in the above and what about when a person is in Mehfil-e-Meelad? In which other instances are we not allowed to reply to salaam?

THE VERDICT:
If a person is an open sinner and commits major sins, then one should not be first to make salaam to him, unless one feels that he can cause harm if you do not do so.

One should also avoid making salaam to a person who is occupied in something, like in eating, a person teaching knowledge of Deen, a person reciting the Quran, a person reading Durood Shareef or a person reading wazifas. The same applies to making salaam to a person delivering a lecture and one who is reading the Meelad Shareef.
It is fine for one to answer (in the above mentioned situations).