By John Davison and Ahmed Rasheed

MOSUL, Iraq/BAGHDAD (Reuters) - Crouching in his Mosul home, Abu Ayman suddenly felt the ground rock as if struck by an earthquake when a massive explosion tore through his street, filling the room with dust and shattered glass. Then came the screams and cries from next door.

His account describes horrific scenes after the blast that may have killed more than 200 people on March 17, as the battle to recapture Iraq's second city from Islamic State advances though the cramped and densely populated western districts.

Running outside, Abu Ayman said, he saw several houses on the street flattened and severed limbs scattered in the rubble. Frantic residents scrambled to pull relatives out of the collapsed homes, where they had sheltered from bombardments.

"I ran to my next-door neighbor's house and with others we managed to rescue three people, but at least 27 others in the same house were killed, including women and children of relatives who fled from other districts," he said.

"We pulled some out of rubble, using hammers and shovels to remove debris. We couldn't do anything to help others as they were completely buried under the collapsed roof."

The risk of civilian casualties in western Mosul was always high as Iraqi government forces and their allies stage the assault. Tens of thousands of residents are trapped in homes around the Old City, where local people say jihadist fighters are using them human shields or herding them into buildings as cover.

U.S.-led military commanders supporting the Iraqi forces acknowledged on Tuesday that a coalition strike probably played a role in the civilian deaths in the al-Jadida district, but said Islamic State could also be to blame.

Exactly what happened on March 17 remains far from clear, but if confirmed those high casualties would mark the worst loss of Iraqi civilian life in a single incident since the 2003 U.S.-led invasion, and risk damaging the Shi'ite-led government's efforts to keep the war from alienating Mosul's Sunni population.

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Coalition officials said there were air strikes in the vicinity of the al-Jadida blast that day. But Iraqi officials have been more cautious, suggesting there was no evidence a strike hit the collapsed building, which they say may have been rigged with explosives by Islamic State.

Reuters spoke to several eyewitness at the scene of the al-Jadida blast, where rescue workers were still pulling bodies from the wreckage on Wednesday, hampered by a lack of heavy equipment and the threat from Islamic State drone bombs.

The slow recovery may partly explain why casualty figures have varied considerably. Rescue efforts started only days after the explosion. One health official of Nineveh province, whose capital is Mosul, said 250 bodies had been recovered by Tuesday night. That differs from earlier Iraq military figures of 61.

Local residents and eyewitnesses say Islamic State fighters were in and around the al-Jadida area the day of the explosion as they battled with Iraqi forces. Air strikes began to target Islamic State positions to clear the way for troops, they said. Several blasts hit the area behind the local hospital.

"We were locked inside our houses as bombing intensified. The air strikes targeted four streets just behind Rahma hospital and Fathi mosque," Abu Ayman said. "A few fighters were moving from house to house, using the holes they made before to avoid detection from the air."

Residents describe the explosion that flattened or damaged at least one large building and other homes around six tight alleyways.

"It was a black Friday," said Ahmed Obeida, another eyewitness. "It started with a huge blast that shook the walls of my house followed by series of blasts. We waited for three hours and after the bombing stopped, I went outside and saw that many houses were destroyed. We entered one house and saw body parts, legs and heads in the rubble."

ONLY LARGE BASEMENT

Investigators were still looking on Wednesday into whether the families were forced into the buildings that collapsed by Islamic State to cause civilian casualties deliberately or whether they had fled there, seeking shelter as they were caught up in the street-by-street fighting.

One local official and an eyewitness said families and relatives from other districts appeared to have packed into one building because it had a large basement that would safely hold many people.

"I saw fleeing families entering the large house, taking shelter in the basement. It was two-storey house and is the only one in the neighborhood with a large basement," said a local resident. "We started to hear blasts getting closer and suddenly I felt my house was about to collapse. It was a very powerful blast. I couldn't believe we were still alive."

Hassan Yassin, who fled from al-Jadida along with thousands of displaced residents, also said the blast happened in a crowded area near the Fathi mosque. "People were all sheltering in basements, looking for a place to hide. It was a random bombardment," he said.

But other accounts from local officials offer a different view of why the residents were packed into one building.

Ghazwan al-Dawoodi, head of the Nineveh human rights council, said his team had made a field visit, finding that militants had forced residents into a bunker, and opened fire on helicopter gunships to provoke a coalition airstrike.

Two eyewitnesses described how Islamic State, known in Arabic by its opponents as Daesh, had parked a truck packed with explosives next to the building. The vehicle may have gone up in an air strike, prompting the structure to collapse.

"I can assure that Daesh brought a truck and parked it in the street next to mine. I saw it with my own eyes but never thought it was packed with explosives," said Obeida. "It's really heartbreaking to see neighbors killed in an instant. Why? What did they do to deserve such a tragic end?"

Coalition officials say that although they may have played a role in the explosion, Islamic State was also likely have had a hand in the blast in an attempt to cause civilian casualties and slow the use of air strikes.

One intelligence officer from the federal police told Reuters his force gives coordinates for air strikes but it cannot call in strikes if officers know civilians are there. He said they use surveillance drones to help in targeting.

Iraq's military command has also blamed the militants for rigging a building with explosives to cause civilian casualties, but some local residents and witnesses have little doubt it collapsed due to an air strike.

"After the bombing stopped, I went outside to see what happened and I was stunned to see the house was flattened," said eyewitness Sameer al-Taie. "Neighbors were hysterically shouting for help but we didn't have anything to remove the large blocks of concrete to rescue people. We heard faint voice asking for help from nearby houses but then the voices disappeared."

(Writing by Patrick Markey; editing by David Stamp)