No this is incorrect he CANNOT make deductions from retrospective payments, if they have already been made, only from payments made after the instruction to cease using gross status has been received.
This contractor would have received a letter detailing a set date (60 days from the date of the review so this would suggest any payments within/after Aug 2013) and I would insist that he shows you this letter and if unable to produce this, then phones HMRC for clarification of the effective date.
Link here for contact details
He cannot act as HMRC collector, its not within his remit to do so, the only time he would be permitted to do this, is when he failed to make a deduction that he should have, and this is discussed and agreed with you, that the additional tax position is rectified from the next x payments.
If you disagree (which you do), he cannot take any more than the required % against the payment due to be paid (so in this case 20%) and then its between you and HMRC to settle any bill after 5th April (if one arises after expenses, and Class 4 national Insurance has been taken into account)
Do feel free to ask any follow up questions, but if you could rate the level of service I have provided, it would be appreciated, as this ensures I am paid.