You are trying to do a credit memo for an invoiced item. When trying to do the credit memo process, it does not show the item as an item that can be returned even though it is on the invoice. The CO Reference column contains a number for another item that was returned before. Removing the number in this column allows the credit memo process to be completed.
The workaround for this issue is to create a credit order from a credit quote:
- Create a credit quote by following the Creating Credit Quotes article.
- Create a credit order from the credit quote by following the Creating a Credit Order from the Credit Quote article.
Using the above method should clear the blocks and you should now be able to create the Credit Memo off the Credit Order previously created for the item.