There are possibly two reasons why caracals have large, dark tufts on the tips of their ears. I say ‘possibly’ because I don’t think we know for sure. Also, you could ask why Maine Coon cats have large ear tufts (although less impressive than the caracal’s). There is no reason why Maine Coons have these ear tufts except for the simple fact that breeders selectively breed for them because they are meant to be there under the breed standard. Perhaps there is no evolutionary reason why caracals have these ear tufts.
However, the most likely reason, because it is based on first hand experience, is to communicate.
Deborah-Ann Milette, an American lady living in New York, was and perhaps still is the guardian to domesticated servals and caracals. She says the caracals flip their ears causing the tufts to move for communication. She communicates with her Israeli caracal, Tesha (see above photo), in this way:
Caracals can communicate with their ears. Yes, they use their ears to talk to each other, which helps keep them safe in the wild….I learned with my quite sociable Israeli Caracal, Tesha. She would flip an ear when I walked to the door. I labeled it acceptance. So I chose to take my fingers in a “V” shape and flip one finger back to her. She would reply with one ear flip then the other ear would flip, OK we had acknowledgment. (see the full article).
The other reason is that the large tufts enhance hearing. Perhaps the theory is that the tufts effectively enlarge the ear flap thereby assisting in funnelling sounds to the ears.