dominance issues?

by JRT owner

My Jack Russell is 1 1/2 years old neutered male and has recently started showing some signs of aggression. I have spent a lot of time training him and he is very smart but I need help! I have noticed that when he is not obeying my verbal signals and I respond in a physical way (not hitting but acting mad) than he reacts aggressively. What do I do when he isn't listening but I can't discipline with spanking?
I originally taught my dog that he is only allowed on the furniture when I call him up. But he has slowly started getting on whenever he wants (my fault for not stopping this). So I have been making him stay off the past couple days and have his dog bed next to the couch for him to use. The other night I left the room and when I came back he was on my couch. I told him to get down in a stern voice (he knows this command). He just looked at me and refused to get off. I repeated the command sternly several times. Finally I lifted up a towel that I was in my hand at the time and was going to shoo him off the couch with it. He then jumped off the couch growled and started barking at me with his teeth showing. I dropped the towel and yelled "No!" When he stopped I picked him up and put him in his cage. This is like the 3rd time he has growled when I approach him where I appear threatening in his mind.Is he reacting this way because he is scared or because he thinks he is the boss? I need to know how to deal with this behavior.
He is such a smart and lovable dog but can be demanding when it comes to attention. He always wants in my lap and loves to snuggle.I think I may have treated him to much like a human and am working on showing him that I am the dominant one in our relationship. Any suggestions would be appreciated. I will try anything!!!