Musnad Ahmad 32:1341

Rawh narrated to us, he said: Shu'bah narrated to us, he said: Hisham ibn Zayd ibn Anas ibn Malik narrated to us, he said: I heard Anas ibn Malik narrating that a Jew passed by the Messenger of Allah, may Allah bless him and grant him peace, and said: "As-sam (death) be upon you." The Messenger of Allah, may Allah bless him and grant him peace, said: "And upon you. Do you know what he said?" He said: "He said: As-sam (death) be upon you." They said: "Shall we not kill him?" He said: "No, but when the People of the Book greet you, say: Wa 'alaykum (And upon you)."