Concept:
Gully formation is a gradual process. It starts from removal of a thin layer of soil and finally develops into deeper channels.
Step 1: Sheet erosion.
The process starts with sheet erosion, where a thin layer of soil is removed uniformly.
\[
\text{First step}=E
\]
Step 2: Rill formation.
As runoff gets concentrated, small channels called rills are formed.
\[
\text{Second step}=A
\]
Step 3: V-shaped gullies.
Rills enlarge and deepen to form V-shaped gullies.
\[
\text{Third step}=B
\]
Step 4: U-shaped gullies.
With further erosion and widening, U-shaped gullies are formed.
\[
\text{Fourth step}=C
\]
Step 5: Tunnel.
Advanced subsurface erosion may result in tunnel formation.
\[
\text{Fifth step}=D
\]
Therefore, the correct sequence is:
\[
E,A,B,C,D
\]
\[
\therefore \text{Correct Answer is (D)}
\]