Can you check for these two things
- if you see shell (sh) interpreter in the interpreter menu i.e. on http://zeppelin_host:zeppelin_port/#/interpreter
here is an example how it should look like.
- on the notebook on which you are trying to execute this command, can you check for the interpreter binding if it active or not.
Here is an example where it is disabled
In the Notebook that you are trying to run the %sh command, click on the gear icon which will bring up the list of interpreter bindings. Verify that the %sh interpreter is selected and highlighted in blue.