I would thing that the safest and most accurate way to do it would be to put a thicker piece of sheet steel over the top of the existing hole, clamp them firmly together and then centre punch where the centre of the hole of the preferred size should be on the top piece and drill the hole the thicker piece on top, and the firm clamping will stop the drillbit "wandering" and the new larger hole will encompass all of the smaller one.
Alternatively, mig-weld the existing hole shut, dress the metal off, and try again.
