Using the phrase indicates a lack of confidence in oneself or someone else, often wrongly. By saying you can't lead the project, you're doing yourself an injustice.
Pro Tip 2/3
Positive Encouragement
It's used to reassure someone that they're more capable or deserving than they believe. Don't do yourself an injustice, your ideas are always innovative.
Pro Tip 3/3
Humble Perspective
People often use it modestly to suggest they or others may have been underestimated. He did himself an injustice when he said he was an average writer; his work is excellent.