Possibly. If your grants and scholarships are greater than your education expenses, then the grants and scholarships would become taxable income. Basically, if box 5 of your 1098-T is greater than box 1 of your 1098-T, then you have taxable income. If box 1 is more than box 5, then you do not have taxable income. Your 1098-T box 5 should include your Pell Grant.
If you paid your tuition with a student loan and then used the Pell Grant for entertainment purposes, that technically would not need to be reported as you using the Pell Grant for non education expenses. The loan is considered yours to do what you want with (in a manner) since you have to pay it back. The IRS treats it like any of your other income or money you use to pay your tuition.
So yes and no, it is not about what you used THAT actual pot of cash for, it is more about did you get more grants and scholarships than you had in tuition and eligible education expenses.
Are scholarships taxable?
Tax Benefits for Education
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