Hogan is right that will dissolve the indentation, but it looks almost 1/8" deep, that's a lot of sanding and a little reshaping too. There is no garauntee that it isn't the same after sanding a while more. Maybe you could sand it down thin like a strat, if that is the top of the guitar. If it is the bottom, sometimes stainable wood glue mixed with the sawdust of the same piece of wood makes a pretty good filler, but is will stain out twice as dark. Below is a way we would stain out knots in mahogany smooth:
Basically, There is also a way during the finishing process to tape up the area with a bunch of layers of tape (about 1/8" deep) and make a "flood" of polyurethane (or whatever you are using as a clear coat) in that specific area. Let that small area cure for a few days, because it is thick as hell, and then sand it down smooth. the crack will be visible under the finish but the surface will be smooth, kinda 3 dimentional like heavily cracked spalted maple usually is.
http://otislotus.net/ Finally finished our new site...