I think this is exactly right. I will use my son as an example.
He had decent grades and an ok act score. But, he applied for a spot in the music department and knocked his audition out of the park. I'm pretty sure that if he had just tried to get in on grades and act alone he would not have been accepted. But, because the music department wanted him, he got a spot that might have otherwise gone to the kid with a higher gpa and act.
So, it's not that there's some secret skeletons in the closet of that kid with the great grades and act. It's just possible that someone with lesser academic credentials got in because of some other positive in their overall application resume.