All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger.
The meaning of this expression is that a Muslim is proud of his religion and he is proud of being a Muslim, and there is nothing wrong with this from an Islamic perspective. Indeed, Allaah The Almighty addressed His Prophet Saying to him (what means): {Say, “Indeed, my Lord has guided me to a straight path — a correct religion — the way of Abraham, inclining toward truth. And he was not among those who associated others with Allaah.”}[Quran 6:161]
Allaah The Almighty also Says (what means): {And who is better in speech than one who invites to Allaah and does righteousness and says, “Indeed, I am of the Muslims.’}[Quran 41:33]
Both verses instruct us to be proud of Islam. Since Islam is the religion of the truth, why should a Muslim not be proud of it? Indeed, this has nothing to do at all with being arrogant and proud of oneself (being self-conceited). Ibn Mas'ood narrated that the Prophet clarified the meaning of pride by saying: "Pride is rejecting the truth (out of self-conceit) and disdaining people." [Muslim]
However, it should be noted that the expression ‘he will not even smell Paradise’ is not from the wording of this Hadeeth (narration) according to our knowledge and information [in the books of Sunnah (Prophetic tradition)].
Besides, there is no doubt that enabling a person to embrace Islam is one of the best favors of Allaah The Almighty on His slaves, and a Muslim should be grateful and thankful to Allaah The Almighty for this bounty. One’s heart, tongue and limbs should express gratitude and thankfulness. One of the ways of being thankful with one’s tongue is to glorify and praise Allaah The Almighty for His bounties, and this is undoubtedly better than merely uttering the aforementioned expression.
Allaah Knows best.