2 Time Machine HD icon in the finder

It appears you have a data volume alongside your TM volume. Notice the TM volume shows encrypted and the other one does not show any encryption...plus the icons are different. And the upper right corner under the drive size, it mentions 2 volumes.

Just delete the "data" volume by using the instructions in the following Apple article as long as that volume contains no data you want to keep:

Add, delete, or erase APFS volumes in Disk Utility on Mac - Apple Support

I believe our friend @HWTech has nailed it.

You simply have a second volume that was created in that drive container. It looks like it can be safely deleted.

Delete that volume by selecting it – the one that does not display the Time Machine icon – then click the Volume delete button ( – ) in the Disk Utility tool bar.

You asked why is it there? That's hard to say, but it doesn't appear to be a real problem.

Remove the one with nothing in it from the Finder Sidebar.

see "Add or remove sidebar items" at > Customize the Finder sidebar on Mac - Apple Support

Hmm.... How do your External drive(s) appear in Disk Utility...?

In Disk Utility can you please select View > Show All Devices and then grab a pic of the Disk Utility sidebar?

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