Namespace gets deleted immediately after sync

Checklist:

[x] I've searched in the docs and FAQ for my answer: https://bit.ly/argocd-faq.
[x] I've included steps to reproduce the bug.
[x] I've pasted the output of argocd version.

Describe the bug

My woes started when I checked Replace in the app that manages compliance operator for OpenShift in an attempt to fix an unrelated issue, which led to openshift-compliance namespace getting stuck in Terminating state due to non-cleared finalizers. I removed them manually, as suggested here (I know, not the best approach, but I was out of options). That helped and the namespace disappeared, but now every time I try to sync the app so that it can create the namespace and dependent resources, ArgoCD just deletes it immediately after creating it. I tried creating it manually and noticed that it gets removed only when it has app.kubernetes.io/instance label set. Any ideas?

Expected behavior

I expect the namespace to get created, followed by all namespace-bound resources.

Logs There is namespaces "openshift-compliance" not found message in the application logs for every dependent object, which makes sense as they all expect a namespace to reside in.

Version

argocd: v2.1.2+unknown
  BuildDate: 2021-10-27T13:19:31Z
  GitCommit:
  GitTreeState: clean
  GoVersion: go1.16.6
  Compiler: gc
  Platform: linux/amd64
argocd-server: v2.1.2+unknown
  BuildDate: 2021-10-27T13:19:31Z
  GitTreeState: clean
  GoVersion: go1.16.6
  Compiler: gc
  Platform: linux/amd64
  Ksonnet Version: unable to determine ksonnet version: exec: "ks": executable file not found in $PATH
  Kustomize Version: v4.2.0 1970-01-01T00:00:00Z
  Helm Version: v3.6.0+gd095be9
  Kubectl Version: v0.21.0
  Jsonnet Version: v0.17.0

argoproj / argo-cd

Namespace gets deleted immediately after sync #8821