SQL Server 2022

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CREATE TABLE Table_Entity (
  id int,
  Level_1 Varchar(10),
  Level_2 Varchar(10),
  Level_3 Varchar(10),
  Level_4 Varchar(10)
);

INSERT INTO Table_Entity(id, Level_1, Level_2, Level_3, Level_4) VALUES (1,'A1', null, null, null);
INSERT INTO Table_Entity(id,Level_1, Level_2, Level_3, Level_4) VALUES (2, null, 'B1', null, null);
INSERT INTO Table_Entity(id, Level_1, Level_2, Level_3, Level_4) VALUES (3, null, null, 'C1', null);
INSERT INTO Table_Entity(id, Level_1, Level_2, Level_3, Level_4) VALUES (4, null, 'B2', null, null);
INSERT INTO Table_Entity(id, Level_1, Level_2, Level_3, Level_4) VALUES (5, 'A2', null, null, null);
INSERT INTO Table_Entity(id, Level_1, Level_2, Level_3, Level_4) VALUES (6, null, 'B3', null, null);
INSERT INTO Table_Entity(id, Level_1, Level_2, Level_3, Level_4) VALUES (7, null, null, 'C2', null);
INSERT INTO Table_Entity(id, Level_1, Level_2, Level_3, Level_4) VALUES (8, null, null, 'C3', null);
INSERT INTO Table_Entity(id, Level_1, Level_2, Level_3, Level_4) VALUES (9, null, null, null, 'D1');
INSERT INTO Table_Entity(id, Level_1, Level_2, Level_3, Level_4) VALUES (10, 'A3', null, null, null);

CREATE TABLE Table_Entity_OUTPUT (
  id int, 
  Level_1 Varchar(10),
  Level_2 Varchar(10),
  Level_3 Varchar(10),
  Level_4 Varchar(10)
);

INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (1, 'A1', null, null, null);
INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (2, 'A1', 'B1', null, null);
INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (3, 'A1', 'B1', 'C1', null);
INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (4, 'A1', 'B2', null, null);
INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (5, 'A2', null, null, null);
INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (6, 'A2', 'B3', null, null);
INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (7, 'A2', 'B3', 'C2', null);
INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (8, 'A2', 'B3', 'C3', null);
INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (9, 'A2', 'B3', 'C3', 'D1');
INSERT INTO Table_Entity_OUTPUT(id, Level_1, Level_2, Level_3, Level_4) VALUES (10, 'A3', null, null, null);

20 rows affected

with group_hierarchies as
  (
    select
    id,
    level_1,
    level_2,
    level_3,
    level_4,
    case when level_4 is not null then 4
         when level_3 is not null then 3
         when level_2 is not null then 2
         else 1
     end as record_level,
    sum(start_new_hierarchy) over ( 
       order by id
       rows between unbounded preceding and current row) as h_group
    from (
    select case when level_1 is not null 
                 and coalesce(level_2,level_3,level_4) is null then 1
                else 0 
            end as start_new_hierarchy,
           * 
      from Table_Entity
    ) dummy_alias
  )
select id,
       (
         select level_1
           from group_hierarchies t2
          where t1.h_group = t2.h_group
            and t2.record_level = 1
       ) as level_1_impute,
       case when t1.record_level >= 2 then
       (
         select max(level_2)
           from group_hierarchies t2
          where t1.h_group = t2.h_group
            and t2.record_level = 2
            and t1.id >= t2.id
          group
             by t2.h_group
       ) end as level_2_impute,
       case when t1.record_level >= 3 then
       (
         select max(level_3)
           from group_hierarchies t2
          where t1.h_group = t2.h_group
            and t2.record_level = 3
            and t1.id >= t2.id
          group
             by t2.h_group
       ) end as level_3_impute,
       case when t1.record_level >= 4 then
       (
         select max(level_4)
           from group_hierarchies t2
          where t1.h_group = t2.h_group
            and t2.record_level = 4
            and t1.id >= t2.id
          group
             by t2.h_group
       ) end as level_4_impute
  from group_hierarchies t1

id	level_1_impute	level_2_impute	level_3_impute	level_4_impute
1	A1	null	null	null
2	A1	B1	null	null
3	A1	B1	C1	null
4	A1	B2	null	null
5	A2	null	null	null
6	A2	B3	null	null
7	A2	B3	C2	null
8	A2	B3	C3	null
9	A2	B3	C3	D1
10	A3	null	null	null