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Ex-Inter striker Nicola Ventola took revenge by inflicting Milan's third defeat in four Serie A games, leaving them 17 points adrift of the leaders.
The Rossoneri's Scudetto ambitions were all but wiped out by back-to-back home defeats to Palermo and Inter, but the 4-1 drubbing of Anderlecht in the Champions League this week and Alberto Gilardino's rediscovered scoring touch boosted confidence going into this game. However, there was a defensive crisis with Alessandro Nesta, Serginho and Kakha Kaladze injured.
Atalanta were smarting from a controversial 3-1 loss at Parma and had to do without Riccardo Zampagna, the suspended Simone Loria and Moris Carrozzieri. The Bergamo boys' last win over their local rivals here was in 1985.
A free kick was touched on for Marek Jankulovski, whose strike was deflected over the bar early on. A corner was cleared as far as the edge of the area, where Yoann Gourcuff controlled with his chest to smash a volley just wide of the near post.
Andrea Pirlo's searching pass found Alberto Gilardino to beat Alex Calderoni, but he was denied his third goal in as many games by a Rivalta goalline clearance.
Migliaccio won the ball back in midfield with a tough tackle on Kaka and set Nicola Ventola running, the ex-Inter striker's shot on the bounce skimming the frame of the goal.
Gennaro Gattuso suffered a large bruise under his eye in an accidental clash with Migliaccio, but was able to continue. Daniele Bonera had penalty appeals waved away for a tussle with Tissone.
However, just as Milan were pouring forward, Atalanta struck against the run of play. Calderoni's clearance was flicked on by Migliaccio for Ventola's spectacular half-volley into the top corner of the net.
Pirlo's free kick was fingertipped on to the crossbar by Calderoni, but it was soon followed by a moment of controversy. Gilardino rolled back the ball for Gourcuff and he clashed with Bellini. The referee awarded a penalty, but after discussing it with the linesman changed his decision to a yellow card for simulation.
Gilardino wasted another good chance when springing the offside trap on Clarence Seedorf's pass, as he couldn't keep his finish on target.
Milan were unlucky, as they finished the game in 10 men for the final 15 minutes after Gattuso limped off with a muscular problem and all the substitutions had been completed.
Dida parried an angled drive from substitute Soncin and Kaka wasted a golden opportunity in the final minute set up by Ricardo Oliveira.
There was drama in stoppages with a Calderoni reaction save on Kaka and Gilardino's follow-up, but on the counter-attack Soncin's deflected strike looped into the top corner past a helpless Dida.
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