This quote is from a Hadith 1887 in Sahīh Ibn Khuzaymah (Arabic: صحيح ابن خزيمة) by Abu Bakr Muhammad ibn Ishaq ibn Khuzaymah (Arabic: أبو بكر محمد بن إسحاق بن خزيمة بن المغيرة):
ثنا علي بن حجر السعدي، ثنا يوسف بن زياد، ثنا همام بن يحيى، عن علي بن زيد بن جدعان، عن سعيد بن المسيب، عن سلمان قال خطبنا رسول الله صلى الله عليه وسلم في آخر يوم من شعبان فقال
— NOTE: My own translation, so treat with care:
Narrated through 'Ali ibn Hujr al-Sa'di through Yūsuf ibn Ziyād through Hammām ibn Yahya through 'Ali ibn Zaid ibn Jud'ān through Sa'īd ibn al-Musayyib through Salman that the Prophet ﷺ said khutba on the last day of Sha'bān, and he said:
أيها الناس قد أظلكم شهر عظيم، شهر مبارك، شهر فيه ليلة خير من ألف شهر، جعل الله صيامه فريضة، وقيام ليله تطوعا، من تقرب فيه بخصلة من الخير، كان كمن أدى فريضة فيما سواه، ومن أدى فيه فريضة كان كمن أدى سبعين فريضة فيما سواه، وهو شهر الصبر، والصبر ثوابه الجنة، وشهر المواساة، وشهر يزداد فيه رزق المؤمن، من فطر فيه صائما كان مغفرة لذنوبه وعتق رقبته من النار، وكان له مثل أجره من غير أن ينتقص من أجره شيء
"O people, you have a great month approaching, a blessed month, a month with a night that is better than a thousand months, that Allah has decreed it [the month] as obligatory to fast [during its days], and arising [to pray] in its nights. Whoever draws nearer to Allah in it with a virtuous habit, it is rewarded as doing an obligatory act (fard) outside it [the month], and whoever does an obligatory act in it, it is rewarded as doing seventy obligatory acts outside it. It is a month of patience, and patience is rewarded by Jannah. It is a month of consolation; in it, provisions of a believer increase. Whoever gives iftār to someone who is fasting will be acquitted from hellfire, and will be rewarded equally [to a second fast] without deducting from the fasting person's reward."
قالوا: ليس كلنا نجد ما يفطر الصائم، فقال
They said: "Not all of us have what we can use to feed a fasting person." He said:
يعطي الله هذا الثواب من فطر صائما على تمرة، أو شربة ماء، أو مذقة لبن، وهو شهر أوله رحمة، وأوسطه مغفرة، وآخره عتق من النار، من خفف عن مملوكه غفر الله له، وأعتقه من النار، واستكثروا فيه من أربع خصال: خصلتين ترضون بهما ربكم، وخصلتين لا غنى بكم عنهما، فأما الخصلتان اللتان ترضون بهما ربكم: فشهادة أن لا إله إلا الله، وتستغفرونه، وأما اللتان لا غنى بكم عنهما: فتسألون الله الجنة، وتعوذون به من النار، ومن أشبع فيه صائما سقاه الله من حوضي شربة لا يظمأ حتى يدخل الجنة
This reward is given to whoever feeds a fasting person, even if it were with a date, or a sip of water, or a sip of milk. It is a month that its beginning is mercy, its middle is forgiveness, and its end is acquittal from hellfire. Whoever lightens the load of one of his slaves, Allah will forgive him and acquit him from hellfire. Do four habits even more: two which you do to please your Lord, and two that you cannot live without. The two that you do to please your Lord are testifying that there is no deity but Allah, and to ask for his forgiveness. The two that you cannot live without are supplicating to Allah for Jannah, and to seek refuge in Him from His hellfire. Whoever satiates a fasting person, Allah will make him drink from my Lake-Fount a drink that he would never be thirsty afterwards until he enters Jannah.
The chain of narration has 'Ali ibn Zaid ibn Jud'ān (Arabic: علي بن زيد بن عبد الله بن زهير بن عبد الله بن جدعان), who is weak in hadith:
- Ahmad ibn Hanbal said he was weak.
- Ibn Hajar al-Asqalāni said he was weak, no hadith should be taken from him except when narrated by others, and had bad memory.
- Al-Dhahabi said he used to memorize (i.e., not write), but he had bad memory.
- Yahya ibn Ma'īn said he was weak, a nobody, not to be quoted.
- Abu Hātim Al-Rāzi said he was weak, his hadith could be written but not used as evidence.
- Al-Dāraqutni said he was to be doubted.
- Ibn Khuzaymah said he does not authenticate him due to his weak memory (in fact, he commented to that effect by quoting al-A'adhumi in his Sahīh)
The conclusion is the hadith is weak due to 'Ali ibn Zaid ibn Jud'ān.
In terms of acceptability of the words, it is not very clear what the phrase means. Mercy is equivalent to forgiveness, as forgiveness is a result of mercy. Acquittal from hellfire is equivalent to forgiveness, as there is no acquittal from hellfire without forgiveness. Acquittal from hellfire is also only by Allah's mercy as can be seen from Sunan Abi Dawud 4901 and Sahih Muslim 184 a.