What is the origin of the saying, "Nothing but mercy is permissible for the deceased"?

The basic principle is to refrain from slandering the dead and mentioning them in a way that displeases them or harms the living, unless there is an overriding benefit. For example, if someone was a disbeliever, or openly displayed immorality or innovation, then it is permissible to slander them and mention them negatively with the intention of warning against their way, or to bear witness against them. This falls under the category of giving sincere advice, and not with the intention of amusement or harming the living.