HC-05 Bluetooth AT+INQ command not working
You have to set the module in MASTER mode to determine RSSI values. So the ideal method would be as follows:

AT+INIT
AT+CMODE=1
AT+ROLE=1
AT+IAC?
AT+INQM?
AT+INQ
AT+INQC


AT+INIT will initialize SPP,after which making CMODE=1 enables all devices to connect and then you set the module in MASTER mode(by default it is in SLAVE mode, and hence you will not be able to determine RSSI). After this the procedure is almost same as you have mentioned.

Cheers!