Israel doesn't want to own or control these populations. The west bank is largely self governing, and Israel pulled out of the Gaza strip and helped orchestrate free elections there. Not exactly the same, but if quebec separated from canada and attempted to join the united states, was rejected, and then was self policing but monitored for crime by the US government in response to periodic violence, would you say the US is therefore not a democracy since they barred the people of Quebec from joining the country? Alternatively, if some of the people in Quebec said the US shouldn't exist and devoted the government to eliminating the US, and the US responded with a naval blockade to prevent arms from being shipped to Quebec, would you then conclude that the US is not a democracy? I think you can definitely question Israel's handling of interactions with the West Bank, especially around the military interactions. But I wouldn't say that Israel isn't a democracy. There are people in Israel who want to annex those territories, and make the people in them citizens. But most people in the territories and in Israel don't want that. The people of the territories refuse to be annexed, and most Israelis don't want to annex them.

Israeli armed forces have been in control of these population for 50 years. The West bank is basically a patch work of Bantustan-style territories surrounded by Israel controlled territory.

Israel controls most of the resources, like water and most of the infrastructure. Those things are made available to Israeli settlers but Palestinians are barley allowed to move from one Bantustan to another.

At the very same time as Israel claims not to be responsible for that area, they also claim the right to move in 10000s of people people into that very area every year.

Israel went out of those territories because close domination is expensive, however simply surrounding the territories, taking their resources and restricting their movement is a cheaper way to control the population.