PhD supervisor wants me to quit after break
If your advisor is suggesting that you quit, it is likely that you will have a hard time carrying on with the same advisor.
You maybe need to have a discussion with them about why your performance was bad, and why you needed a break. As it currently stands, it sounds like you had one year in the program without any progress, and then another year where you took a break and also made no progress, so it is two years since you were admitted to the program and you are essentially a new student. From your advisor's point of view, suggesting you quit is good advice as they feel it is unlikely that you will finish your degree. If you want to work with them, you need to convince them that this is not the case.
If you want to continue to pursue a PhD, and you are unable to reach a point in discussion where your advisor is empathetic to your situation and enthusiastic about working with you (not just grudgingly willing to work with you), you probably should either 1: change advisor at the same university, 2: leave your current program and apply to other programs.
I would like to add my perspective as a supervisor having a PhD student suffering from a depression. She has been absent for about two years now and not yet returned. Neither me nor she herself have anticipated that it would take so long. The year might have been a surprise for your supervisor, too. I have been supportive over all this time and will keep that up if possible when she returns. She is four years in her PhD work so only needs a few small steps to complete. However, her progress might become state of the art someday also without her thesis, and then it might be difficult to give her the degree. This is something you should take into account, too: After a while with no progress, it will become more and more likely that your topic becomes obsolete.
The situation is not easy for me either. Of course I wonder how big the share of the PhD work and my supervision is for this situation. And I am competent in giving advice in the research, but not sure how to handle somebody with a depression. Your supervisor probably is in a similar situation, so also her/his actions need some understanding. I try my best, but it might not be the best.
As a supervisor, it is your duty to give the PhD students feedback on their progress, and part of that is to tell them whether they will probably make it or not. I have seen many PhD students not suffering from a depression having a hard time during their work. A PhD student usually needs all the power to succeed. In the example described above, I might have advised her to think about quitting too if she was only in the beginning of her thesis. This might be good advice, and you should consider it if your supervisor says so. Discuss it openly with all people involved.
It is hard to know how to advise you in particular because there are many aspects of the situation that are not covered in your posting. However, here are some ideas that may be helpful.
You should not do this by email. Email is not a good medium for important discussions such as this. You should request an in-person meeting with your advisor. Before you go to that meeting, you should have an agenda of what you wish to accomplish. For example, you may wish to bring old emails and ask your advisor how is it possible that you could have been told that you were one of the advisor’s “strongest students” and now there is a very different assessment of your first year’s work.
You don’t make it clear if you are still depressed or not. You may be misreading your advisor’s emails. So again, I recommend printing out representative emails from before and from now and showing them to a neutral third party.
It is possible that your supervisor is depressed as well, or is going through their own life issues. Therefore, you may wish to show the emails to a dean or the ombuds office at your school, if you have one.
Leaving a Ph.D. program now does not mean that you will be giving up on your dream of getting a Ph.D. You may find another program in a few years. You may switch fields. There are many people who have started in one Ph.D. program and completed another after a period of time. The critical issue is what you accomplish when you are not in the program: if you are academically active, if you are writing, if you are participating in research-like activities, then you should be able to land a position in another program.
Why do you want a Ph.D.? If you have a love of research, you may find that there is a corporate research lab that you can join for a few years. You may find another lab, either at the same school or another, that is happy to have you as a part-time, unpaid lab member.
There are many possibilities. It’s a big world. There are many people who have completed a Ph.D. while depressed. There are many advisors who have a toxic relationship with some of their advisees, and end up making their advisees depressed. There are some advisees who are toxic to their advisors. The Ph.D.-advisee relationship is a charged one. This may not be the best pairing for you or for your advisor. But it may be that either you or your advisor are not objectively evaluating the situation. That’s why it’s useful to write things down, print things out, and to involve other people.