An early morning fire yesterday gutted Bassin's Restaurant and Cocktail Lounge, a popular downtown eating spot and the city's first sidewalk cafe.

Throughout the day fire officials and the police arson squad searched the rubble looking for the cause of the fire that had left the restaurant, at 14th Street and Pennsylvania Avenue NW, a charred bulk.

"We cannot rule out arson," said Capt. Maurice Kilby of the fire marshal's office. He added it would probably be several weeks before tha exact cause of the blaze is determined. Much of the evident collected had to be sent to a laboratory and tested for the presence of flammable fluids, he said.

There were no injuries.

The fire occurred less than a week after city health officials had allowed the restaurant to reopen. It had been closed for almost two weeks after being cited for numerous health violations.

During the afternoon, passersby from several nearby government buildings paused to inspect the fire-ravaged building, a longtime, Pennsylavnia Avenue landmark and a favorite spot for a summer afternoon beverage.

"There goes a real tradition downtown," said Maurice Pollard of the Department of Labor. "This was really one of the highlights of downtown," he said, gazing at the pile of charred tables stacked in front of the restaurant.

The fire erupted at 3:47 a.m., moments after two police officers had searched the building for the source of a peculiar odor reported by a late-working employe, police said.

Although they found nothing unusual inside, police noticed smoke as they were leaving the building.

The fire, it was later determined, had begun behind the bar of the L-shaped restaurant, which frots on both Pennsylvania Avenue and 14th Street.

It took firemen two hours to put out the blaze, which damaged all four floors of the building and caused smoke damage to two adjacent businesses, the Locker Room and Fotomat.

A wealthy South Vietnamese family bought the business two years ago for $450,000, according to Harry Zitelman, one of the sellers. Zitelman and his brother, who still own a building that houses part of the restaurant, visited the fire scene twice yesterday.

The Zitelmans said the Vietnamese family, headed by Lac Than Trong, former executive of a Saigon pharmaceutical firm and the former owner of two Vietnamese restaurants in Paris, has leased the Bassin's site for $3,000 a month and was current in its rental payments.

The Zitelmans' building, at 1327 E St. N.W. was insured for $278,000 and its contents for $75,000, according to R.M. Kalbacher, manager of the D.C. Property Insurance Facility, a cooperative agency created by private insurance companies to handle high-risk business policies.

The remainder of the restaurant occupied space in an adjacent building at 505 14th St. N.W., owned by real estate investor and former brewer Christian Heurich Jr. Heurich said the restaurant paid $3,770 a month in rent for this space.

Neither Lac Than Trong nor his son Thuy Lieh Than Trong, who holds 60 percent of the company stock, could be reached for comment yesterday. The family, according to Heurich, lives in 11-room house in McLean.

The loss of Bassin's left many of its regular patrons looking for a new place to wine and dine. "A certain group of government employes had a camaraderie built up there because we were regular patrons," said a Department of Commerce official. "This is like losing a club - at least the clubhouse is gone."

Bassin's was opened in 1939 by Max A. Bassin, a Treasury Department employe. The restaurant became the city's first sidewalk cafe in 1961 abd was a favorite sunning spot for tourists and government workers.