Why is o-nitroaniline not more basic than aniline?
Yes it is true that SIR is observed in o-nitro aniline so it will not show -M effect.

But I think you're confused in the resonance of the lone pair of NH2 group with the benzene ring which in fact occurs in both cases. The thing that makes o-nitro aniline less basic is the -I effect which makes the lone pair on - NH2 group less available for donation .

In fact the complete order of basic strength of nitro substituted anilines is:
[Aniline>m-nitro aniline>p-nitro aniline>o-nitro aniline ]