Combine the milk, yogurt, salt and sugar in a saucepan. Heat over medium heat, stirring occasionally with a whisk. As the milk is just about to boil (it will bubble at the edges), stir in the lemon juice.
Pour the regular milk into a large pot. Bring to the boil over medium heat. Watch carefully, as it will boil over almost as soon as it starts to boil. As the milk begins to boil, pour the buttermilk into the pot in a steady stream while stirring constantly. The milk will separate into curd and water.
Remove from the heat and pour into a sieve lined with cheesecloth. Lift the cheesecloth by the four corners and tie them together. Hang the cheese in the cloth over the sink to drain. It will take 30 minutes to 1 hour. Once drained, place the cheese, still in the cloth, into a bowl and refrigerate until ready to use.
Place a piece of muslin into a colander, and pour the milk mixture through it. Reserve some of the liquid for later. Let the milk mixture sit in the colander for a couple of hours, or until it stops dripping.
If later you want to cut the paneer into firm fingers, use a spoon to press the paneer into the shape of the bowl before refrigerating.
After the curds are strained and settled, transfer them to a food processor. Process until smooth. It should be able to form a ball if it is the right consistency. If it is too dry, add a little of the reserved liquid and process again. The consistency should be like a firm ricotta cheese.
Turn the cheese out onto a clean surface, and knead until smooth. Form into a ball, and wrap in clingfilm. Refrigerate until needed.
To cook the paneer, heat the oil in a large heavy frying pan over medium-high heat. Cut the paneer into bite size pieces. Fry for about 1 minute, or until a very pale golden brown. Drain on kitchen roll. Add to your favourite curry or dish.