embedded statement cannot be a declaration ..."

Why are { }  compelled in your case?  Good question.

Its because of the SCOPE.

Lets see some examples :

for(int i=0; i<10;i++)  
Console.Writeline(i);         // Perfectly fine

int x = 0;   
for(int i=0; i<10; i++)  
x = i;                // this is also fine because 'x' is declared outside for loop 

for(int i=0; i<10; i++)  
int x = i;                    // NO, not allowed. Why?  

As you know, in the above scenario, we are declaring a new variable 'x' inside for loop and assigning a value to it. And once the for loop execution is finished, 'x' is destroyed. So what did we accomplish with 'int x = i' in the for loop? Nothing. So, the compiler figured out that 'declaring and assigning a variable in a for single-statement for loop without braces does NOT do anything' and so it threw an error.

We can fool the compiler by including that statement in curly braces, like shown below : 

for(int i=0; i<10; i++){  
     int x = i;  
}  
   

In this case, compiler thinks " Okay, since it is a block now, the dev might include some more statements in that block where he will use that 'x' - so lets not throw any error"

So, now its time to review your code ( below ) and see if you are acheiving anything with that 'lbl' or simply fooling the compiler :) :) .  

for (int k = 1; k <= 3; k++)

{

Label lbl = (Label)Controls["label" + k.ToString()];

}