What becomes of context-sensitive grammars if $\epsilon$ productions are allowed?
It can be shown that the context sensitive grammars you describe are equivalent to just asking for productions $\alpha \to \beta$ with $\lvert \alpha \rvert \le \lvert \beta \rvert$. So allowing productions $A \to \varepsilon$ just removes the restriction on lengths, and you have landed on unrestricted grammars.