I'm sure i read a player on these forums saying that toughness cannot cancel damage from counterstrike because it is applied as soon as it is assigned.

However I read in the rules today that Toughness kicks in during the Apply damage step of the Battlefield Phase.

Does this mean that Toughness can cancel damage assigned from Counterstrike?

From the rulebook

"Whenever the unit with the Counterstrike keyword is declared as a defender, it immediately deals uncancellable damage equal to this
numeric value. This damage must be dealt to a single attacking unit of the defending player’s choice; a unit
with Counterstrike cannot split the Counterstrike damage amongst more than one unit. Counterstrike damage is always applied as soon as it is assigned, before any other actions can be taken.

So, I dont think it has anything with the timing of the Assign and apply damage steps, its simply that counterstrike damage is UNCANCELLABLE, and so immune to toughness.