Yes they CAN exist in the same folder BUT usually you would want to keep them in seperate folders as its less likely you will open the wrong file and work in that. If you are working with SASS then you should never touch the associated .css file after creating it. You work exclusively in the .scss file and everything you do in that will automatically get complied to the .css file. So if you created the .css first and worked in that and then created the .scss file, opened it and saved it with nothing in it then it would wipe out anything in your .css file. The .css file is an EXACT replica of your .scss file - albeit the css is compiled of course.
Personally I never use SASS as I feel its potential to cause confusion is greater than its value, especially if you are designing basic websites. You could have a developer in your team or another team come along and change your .css file, without you knowing, which then renders your .scss file next to useless i.e. you then, yourself, work in the .scss which gets complied to the .css and any additions in the css file, which the other developer included directly gets wiped out.
Web-development these days is overly complex and uneccessarily so in many cases as a result of new developers wanting to distance themselves from what has become an easy, mostly skilless profession, so they invent more and more complex routines to fool themselves into believing they are inteligent, skilled and clever where in fact they are quite the opposite, management gets more complex, clients pay more.