 Solution

Treat this as standalone organophosphorus chemistry. The phosphorus(III) lone pair attacks the terminal nitrogen of the organic azide. Cyclization of the initial phosphazide and loss of nitrogen give an iminophosphorane:The ortho amide provides a neighboring acidic NH proton and a carbonyl oxygen donor. A proton relay to the imino nitrogen and intramolecular O$\to$P attack generate a five-membered, O-bound pentacoordinate phosphorus intermediate. Water can then attack phosphorus, with proton transfer to nitrogen, followed by P–N cleavage and opening of the neighboring-group contact.

The overall hydrolysis products areThe carbonyl group assists the hydrolysis and is regenerated; the product is an aniline and the ortho-carboxamide phosphine oxide, rather than an amide-linked ligation product. The favorable five-membered intramolecular interaction and proton delivery help hydrolyze a normally rather persistent aryl iminophosphorane. This explanation concerns only the printed chemical transformation.