Yes, it is quite common for this to happen. Especially when people include exercise in their program. They may lose a pound of fat and build a pound of muscle. (You'll note I didn't say turn fat into muscle which is impossible!) As muscle is much more compact than fat, the person can quite easily be a much smaller person and yet their weight has virtually been unchanged. This is why relying solely on the scale as a measure of progress can be discouraging. It's much wiser to have your body composition measured - how much fat and how much lean you're carrying - and work to lowering the fat percentage to a healthy range rather than dropping weight at any cost.
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