Muscle is denser than fat. This is why people say muscle weighs more that fat. So theoretically
it is possible to lose inches while gaining pounds if you lose fat but build a significant amount of muscle at the same time. However this doesn't happen that often. That's because muscle burns more calories while at rest than fat does. So building more muscle increases your resting metabolism. This leads to you burning more fat than you would do by dieting alone. And while your body consumes muscle as well as fat while dieting, rebuilding that muscle means that most of what you are losing is fat. This is the best way to lose weight!
Unless you are a serious body builder you usually don't gain as much muscle as you lose in fat while dieting and working out. A well-toned body with a healthy percentage of fat is never going to weigh as much as an obese person. And since the name of the game is health and not just getting emaciated it's good
to put on a bit of muscle! It tones your shape and keeps you healthy in the long term. So while it is true you would weigh less if you didn't build muscle it's healthier to weigh a few kilos more and have good muscle tone.
And remember that since muscle is denser than fat if you have a low fat percentage and more muscles you will be thinner than someone who weighs the same but has poor muscle tone and lots of fat. As an example, an out of shape person of 60kg might be a size 12 whereas a very fit person with lots of muscle might weigh 60kg but be a size 10. I know which I'd prefer to be!
It's also important to remember that recommended weights in the BMI range are for normal active people. Not athletes or bodybuilders. If you are basing your goal weight on BMI then that's fine provided you're not doing a heck of a lot of exercise. If you are doing a near professional level of exercise you would probably have to adjust your goal weight accordingly, or better yet aim for a healthy fat percentage and base your success on body measurements rather than worry about your weight at all.
I hope this helps!