(a) If the director finds that a claim for refund or credit or portion thereof, including a claim deemed made and denied pursuant to subdivision (a) of Section 1179.5, has been erroneously denied, he or she may reverse the denial of the claim or portion thereof in the following cases:
(1) Where no petition for review of denial of the claim has been filed or deemed filed, if the reversal is made prior to the expiration of the period within which a petition for review may be filed under Section 1222.
(2) Where a petition for review of denial of the claim is filed or deemed filed, if the reversal is made prior to the mailing of a decision by the administrative law judge.
(b) The director shall give notice pursuant to Section 1206 of the reversal of an erroneous denial of a claim or portion thereof under this section. With respect to that portion of any such claim which remains denied by the director, the notice of reversal shall also constitute a notice of denial of such portion and Sections 1222, 1223, 1224, 1241, and 1242 shall apply.