Please use the noboot project to debug the firmware. You can refer to this thread How to debug cypd3135 in cy4531? .
Also please refer to this KBA : Debugging CCG3PA with a MiniProg3/Miniprog4 - KBA227291
that solved my problem. I was able to debug the Code after setting the #define HPI_WATCHDOG_RESET_ENABLE to 0 and the #define SYS_DEEPSLEEP_ENABLE to 0 in the config.h file of the noboot project.