I've been thinking about doing similar (just with sleeves), and I think this is how I'd go about it:
1) Cut slits
2) Hem slits, so the hole ends up elliptical, rather than just a line.
3) Sew the top of the slashed fabric to the lining fabric.
4) Puff the lining fabric through the hole to the desired degree, and tack into place.
Bear in mind, I haven't attempted this..