I think we have to consider the scenario under which such a piece would be used: when one side or the other 'broke through' into the tunnel of the enemy. Such a break through would naturally start as a relatively small hole in the wall of the tunnel, through which one might throw a grenade or shove a hand holding such a cut down rifle. The flash and blast would be mostly confined to the enemy tunnel and would go a long way towards blinding and stunning any enemy within, without the risk of collapse or cave-in that a grenade might cause. A few such rounds would kill or incapacitate any enemy within reach and deter others from entering the tunnel stretch in question until the wall could be broken through enough to admit the attackers.
Seems logical to me.