The TSO allocate command doesn't work for a dataset name as you've provided. It has to be a real, actual dataset name, something like:
INNAME = "myhlq.DCOLLECT.ALLVOLS.G0001V00"
which uses the absolute generation format of a GDS.
Which will work fine. If you really want to create a new GDG using the relative generation, then I'd suggest that you allocate the GDG in the calling JCL, not within your REXX exec.
If you absolutely MUST try to allocate a new generation using a relative generation, in a TSO foreground process, then you'll have to use the BPXWDYN dynamic allocation routine:
/* REXX */
allocstr = "ALLOC DD(SYSUT2) DSN('THE.GDG(+1)')",
"NEW CATALOG REUSE RELEASE",
"RECFM(F,B) UNIT(SYSDA) DSORG(PS) RTDDN(THEDDN) RTDSN(THEDSN)"
Do i = 1 To 10
Queue "Record"Right(i,3)" of 10"
"EXECIO "Queued()" DISKW SYSUT1 (FINIS"
x = LISTDSI(SYSUT2 FILE)
Say THEDDN THEDSN
Do n = 1 To S99MSG.0
allocstr = "FREE DD(SYSUT2)"
Just keep in mind how GDG processing works, how system enqueues are placed and how the next absolute generation number is determined.