Validity of the leveling effect of water in nitration reactions Wikipedia gives this as the levelling effect of water


  Any acid that is stronger than $\ce{H3O+}$ reacts with $\ce{H2O}$ to form $\ce{H3O+}$. Therefore, no acid stronger than $\ce{H3O+}$ exists in $\ce{H2O}$. For example, aqueous perchloric acid ($\ce{HClO4}$), aqueous hydrochloric acid ($\ce{HCl}$) and aqueous nitric acid ($\ce{HNO3}$) are all completely ionized and are all equally strong acids.


So from what I can understand, if I take an aqueous medium, then $\ce{H2SO4}$ and $\ce{HNO3}$ both should be equally strong. 

But then comes the nitration reaction, where the nitronium cation acts as the real attacking electrophile, which means that in this reaction, $\ce{HNO3}$ acted as a base and $\ce{H2SO4}$ acted as an acid.



I am also aware concentrated acids are taken in the nitration reactions, but even the most concentrated acids have some amount of water.


How are these two concepts contradicting, where am I going wrong?
What are the limitations of the levelling effect and where all is it applicable? Is it not applicable to concentrated solutions, and if so, how concentrated?
What you have gone wrong in this question is you completely disregard the fact that mentioned stronger acids than water are all in aqueous medium, in other words, dissolved in water. Thus, fast acid-base reaction ($\ce{H2O}$ acts as a base here) happens to give $\ce{H3O+}$ as the only acid in these mixtures (leveling effect of water).

On the other hand, concentration of sulfuric acid is $\approx 98\% (w/w)$. That means, approximately only $\pu{2 g}$ of $\ce{H2O}$ in $\pu{100 g}$ of concentrated solution. Therefore, mole ratio of $\ce{H2O : H2SO4}$ would be about $0.1 : 1$. Thus, ($\ce{H2SO4}$ is not leveling with water. That extra remaining $\ce{H2SO4}$ can be acted on $\ce{HNO3}$ in nitrating mixture as shown in your scheme (vide supra).

Note: As a rule of thumb, you may simply consider $1:1$ mole ratio of water and any stronger acid than water would be the limiting level for the leveling effect.