By default, Magento doesn’t allow you to delete Orders on the backend.  Well, there is no option in the admin for now.  But guess what? there is a work around (yeah~ I know you’ve already expected this.).  Boutik Circus created this “Delete Orders” extension which allows you to delete cancelled orders.

Why can we delete cancel order only?
That’s because deleting a complete order breaks links with invoices and shipments and could creates a lot of troubles.

Go to Delete Orders Extension.

Install this extension via Magento Connect Manager.

Magento Connect -> Magento Connect Manager