My company agreed to file H1B visa and later rejected. Is the justification valid?

I have been working for a mid sized company for more than 3 years in USA. My visa status is H4 EAD and I felt this is a right time to ask my employer to sponsor my h1b visa.
My company have never filed H1b visa in the past. Since I have earned a great reputation in this company and my manager and even the CIO of IT department don’t want to loose me, they put up my request to HR. After many back and forth conversation between the HR and my manager/CIO they had finally agreed to file h1b for me. That was the happiest day. Since they don’t have any expertise in filing a visa they hired a legal company to file my application. Four months fast forward, Today I got a response from my HR that they cannot file my visa. Below is the explanation:

Your position as a BI Report Developer requires a minimum educational requirement of an Associate’s Degree although a Bachelor’s Degree is preferred. Alliance is unable to reclassify your position. Therefore, your position will not qualify as a “professional position” but instead a skilled worker, classifying the position in the “Other” employment-based category, which currently has a 10+ year retrogression wait.

Additionally, recruiting for your position with the requirement of an Associate’s Degree will solicit a large number of responses from qualified U.S. workers through recruitment, making it very difficult to obtain Labor Certification approval.

Below is an excerpt of the job posting for which I had applied 3 years ago.

Associates degree in Computer Science, Business Administration of a
related field and five (5) years of experience with increasing
responsibilities in managing and supporting information technology in a
healthcare setting;
Bachelor’s degree in Computer Science, Business Administration or a
related field and three (3) years of experience with increasing
responsibilities for management and support of healthcare data reporting
systems and information technology, including direct management of a
major IT operation preferred.
Experience with the following is preferred:
Prior experience with MDX or DAX highly preferred
Prior experience in the Healthcare industry highly preferred

Apart from this, there were couple of preferred skills mentioned in the job description.

Based on the above job description, bachelor’s degree is also required along with work experience. I had a masters from US and 4 years of experience when I applied for this position. Currently I have 7 years of experience in my field.
My question is, is the justification given by my company valid?

My question is, is the justification given by my company valid?

Simple answer: Legally, your company doesnt require to give any explanation for their action.
Since you have an established professional ground with them over time, they have tried to find every option for your request.

You said “Based on the above job description, bachelor’s degree is also required along with work experience.”

The job posting had typos. There should be OR not AND between the options of qualifications.
The minimum required qualification is Associate degree + 5 years exp. This is what the HR is referring it as a concern to classify that position as “Skilled Worker”, which is the basis for LCA filing for H1B visa.

Its not what you are having qualifications, determines the position, its the position which decides the required qualifications(which is not a skilled worker position), you are simply over qualified.

Since that company goes by book, they are right, they cant find a way to classify your position as a skilled worker position.
But if they re-classify it with additional skilled requirements around it as basic qualification and it falls around your skills/qualifications, then they may have a case to claim an LCA.