When working with AX 2012 projects in LCS (Lifecycle Services), the option for adding Work Items from LCS is missing after completing the setup of Visual Studio Team Services (VSTS) integration. When creating a Dynamics AX (AX7) project and doing the exact same setup, then Work Items can be created from LCS and stored in VSTS.
In an AX 2012 project, if you choose a storage location of VSTS, then the work items need to be created within VSTS, but once created it can be opened from LCS.
If you choose the storage location of LCS, then you can create new work items in LCS, but then there is no VSTS integration.
When you configure VSTS integration in your LCS project, then you need to link it to a specific VSTS project. When you create work items in the linked VSTS project, then the work items will be seen in your LCS project/Work items. You can open the work items from LCS by clicking on the ID link (yellow mark in image below).
Note:
Only work items of type Bug or Task created within the linked VSTS project will be visible in your LCS project/Work items.