I haven't gone through the entire code yet, and it might be tricky to test your code since I don't have pandas, but let me answer your question about the function call.

The replace() function replaces the value '.xlsx' to '.txt' in the string variable sheet_file.
The string variable sheet_file holds the name of your Excel file.
So, let's say while looping through the sheet_directory, your Python program finds an Excel file called "S12.xlsx". Then sheet_file will equal "S12.xlsx".

Thereafter, this expression:

Code:

sheet_file.replace('.xlsx', '.txt')

replaces '.xlsx' to '.txt' and thereby returns 'S12.txt'.

And then this value 'S12.txt' is passed to the function get_text_data().
That is, the value of the string parameter txt_filename is 'S12.txt'.

You can see this very quickly by printing txt_filename the moment you enter the function.

In the "with" statement inside the function "get_text_data", however, you use the same name txt_filename. That converts the string parameter txt_filename to a file object.

Thereafter, till the end of the function "get_text_data", txt_filename remains a file object.
So essentially, you are not using the txt_filename parameter in your function at all.

My suggestion: don't pass a parameter to a function if you are not using it at all. You anyway have the text file name ("scores.txt") and location hard-coded.
If something is not needed, discard it. Keep it simple.