Actually, that each of the princely states would join India, the British Colony, had been decided as far back as the First Round Table Conference. The idea of these mergers was nothing new, nothing concocted just for the Dominions to be. None of the states, sovereign though they were in essence, was given the option even then of staying independent. The Congress had started agitations and people's movements in the states by then, and it was clear that it would be much more difficult stopping these in the states than even it was in the efficiently organised Colony lands proper. It was this imminent danger that forced the British hand and that persuaded the Indian princes to consider merger.
The merger was not planned for 1947; it was planned for 1935. Elsewhere, somewhere,
@Parul has reproduced a document, the covering letter to the Instrument of Accession, which was accompanied by another, the actual Instrument of Accession. This Instrument was not patched together in 1947; it was drafted at the time of the promulgation of the Government of India Act, 1935. That Act, and the creation of autonomous states within the Colony, was thwarted because of the Congress belief that they only had to push harder to get to the next goal, Dominion status.
So as far back as 1935, the British were willing to hand over power to autonomous states within the Crown Colony, and were willing to lean on the princes to merge with the colony, ultimately, with the autonomous states. There was nothing, then, about Hindu and Muslim; it was then only Madras, Bombay, Sindh, CP, UP, Punjab, Bengal; I may have got the tally wrong but this was it, more or less.
Therefore the plan in 1935 was for the princes to merge with the provinces. Period.
Once Congress shot itself in the foot and boycotted the Assemblies and the Legislatures, the communal factor came in. It was from roughly 1939 onwards that the idea grew that Muslims needed a territory where they could live peacefully without the majoritarian pressure of the Hindu community.
@Oscar has defined it rather well, I don't think I can do better.
Perhaps this will explain adequately why saying what you did was incorrect.